Reilly Newman | The biggest downward spiral that businesses fall into is when they compete on price.
You know the feeling — that gravity you feel when you hear the price of a competitor or see the sale they are currently running. You jump ahead to the conclusion that they will sell more than you because their price is lower. This initial assumption is met with anxiety and the fear-driven decision to lower your price in order to compete. Alas, this assumption is not alone! It’s quietly accompanied by the belief that the buyer who goes for the lowest price is your buyer as well….
This is a self-defeating attitude that leads you down the path of unsatisfied customers and razor-thin margins. By competing on price, you have forfeited your self-respect and fallen prey to the race to the bottom of price and the type of bottom dwellers (consumers) who live there.
Before I journey onward, if this race to the bottom is one you enjoy and find fruitful, then to each their own. However, in my personal experience, I have seen dozens of businesses find themselves here, only gasping for air as the oxygen of profitability drops below sustainable levels making it impossible for them to provide true value and ultimately survive. Overall, I believe founders deserve better.
When we challenge ourselves not to follow the downward pressure of price wars, we empower the business to stand out. Just because a competitor may charge much lower than you for their offering doesn’t mean you have to.
Yes, markets do have standards of pricing — there’s an average. The middle area is where prices gravitate towards because when a new player enters the market, they look around and see what everyone else is charging (you may be guilty of this yourself). The assumption here is that all providers of the offering are providing the same amount of value. This belief puts a ceiling on your potential and is just wrong.
Competing on price means competing with yourself, as your own innate assumptions drive you further down the abyss of lower prices and sales. The remedy is to compete on perception, not price.
The first step is to change your perception of your business. Your business is not for everyone and just because someone can buy does not make them your buyer. (For more information on this, check out our Brandy podcast, Grassroots Marketing & Brand Growth )
Next, you need to change your perception of pricing. Pricing isn’t a number to justify cost, but a signal of value. Your pricing not only signals your value, but helps the right audience appreciate you for it. (For more on this, check out my Thunq article: The Pain of Price )
Lastly, you need to change your perception of your audience. Similar to performing on stage, would you want a room full of people who only paid because you had the cheapest tickets? Or do you want a room full of people who paid because they see the value in your performance and are there to experience it? (For more information on this, check out our Brandy podcast episode: The Theater of Brand)
Once you have reframed your perception of these, then you’ll be able to address the perception you are competitively bringing to the market. As your competitors bicker over price and sales, you can play a different game. A game of perception that leverages the value association of price.
When you compete over perception, the audience compares your offering, price, experience, packaging, staff, and more compared to the other options they have. Beyond who costs the least, they are now comparing how they feel about your business versus the others and their perceptions of each.
Just as competing on price is full of assumptions, competing on perception is focused on evidence that is signaling to the buyer. You are no longer making assumptions about how they see you but giving them clear signals of how they should see you.
