This small business advice, try not to compete on price should be changed to DO
Watch the competition but do not compete on price
NOT compete on price, but that may be a bit hard to take. Watching what the competition is doing is important, but following blindly when many are discounting madly could lead to disaster. Here is what Michael Hess has to say in his article on ‘Why you shouldn’t stress about the competition‘. I especially like how Micheal offers an alternative to competing on price.
Small Business Advice – try not to compete on price
Pricing: This is probably where competitor-obsessed decision-making is most dangerous, especially for small businesses. Author Mark Stiving said it best: “Pricing is not a sustainable competitive advantage.” You may be desperate for sales, but it does you no good to get sucked into price competition that erodes your margins and might even put your business at risk. You might win some battles but lose the war.
The Alternative: Let others race to the bottom. Better to price where you need to be to run a healthy business, maximize the value of your product and company to customers, and only take business that is good for you. If you can’t get the business you need without risking your financial health, there is either something wrong with what you’re doing or you’re in the wrong business. My father’s favorite expression in running my family’s successful, 50-year-old business was “Volume is vanity, profit is sanity. Click here to read more of this article from Michael
You are in business to make money, to make a living, so to take on your competitors and compete on price may work in the short term, you may gain new customers and wow them with your service or other points of difference. However, to carry on trying to compete on price in the long term will be detrimental to your business and may mean business failure.
Have you competed on price & won……. or lost? I would love to hear your opinions and comments on this post.
I’m trying to price-match in an effort to break into a new market for me – social media design. It’s an experiment and I’ll see how it works. Normally small business people find my prices too high, so I’m just seeing if I can accommodate their needs.
Hi Louise, That can be a good strategy for new business, and a great experiment, however make sure you don’t get ‘trapped’ into continuing if not profitable.
you may find your clients more on linkedin than FB louise…the average income is 109K and the businesses are already established.
Thanks Rebecca
Thanks!
I learned the hard way about competing on price and I can say this article is spot on.
==>JIm
Thanks Jim, It’s something I have to remind myself of as well!!
Good advice to follow. Competing on value is a much sounder strategy.
What do you think?
-Romy
Thanks Romy, your business must have points of difference to stand out from the crowd, and yes competing on value is part of that. However be sure that your customers know what this value is. Perceptions, right or wrong are hard to change and have a great effect on customers decision making.
I am one of those shoppers that is always looking for price but once I find something exceptional whether it be the shop owner or the product, I will be less inclined to use this as the baseline of my choices…
Thanks Rebecca, it’s good to hear that there are factors which can sway a consumer away from being solely influenced by price.