When you are trying to bring in new business and customers, it is always tempting to look at your competitors and try to compete with them on price.

Price wars are pretty common in business everywhere. It starts with one business lowering its price to attract more customers and outmaneuver its competitors. Its competitors are then forced to lower their own prices to match it or go lower. The logic here is that by undercutting your competition, they get squeezed out of the market. This goes on and on until everyone’s profit margins are razor thin. That’s the typical price race to the bottom...

Is it worth trying to compete on price?

Imagine that your profit from every customer is $1 and your competitor’s profit from every customer is $5. Let's pretend that your goal of luring some of your competitors customers was successful. 

However, this also means you’re getting to work more for less and less. In the first place, you’ll need 5 times more customers to get the same profit as your competitor. 5 times the work and 5 times more customers to look after. 

On the other hand, your competitor can devote more time to strategize and increase value rather than finding more sales. Moreover, it also means that you have to cut costs to maintain profitability. If this keeps continuing, can you maintain your own quality of your product?

The question you may be thinking is that if you don’t have the lowest price, people are not going to buy my product. 

That’s a total misconception!

Yes, some people may not buy. But do you really want these picky customers that shop based on the lowest price? If you had a choice, I’m sure you won’t. They will always be loyal to price first. They will always going to be looking for you to give them further discounts or be lured by the competitor who can.

In the long run, the perceived value of a product might also be lost because of the bargain pricing, this develops unrealistic reference prices for the customer and this also makes it harder to increase prices in the future. 

Sometimes people often pick the lower priced product or service because price is the only difference they see. Therefore, the more you are able to help and educate them to understand about your product or service, the better informed decision they can make. Find ways to educate them. You can do it through a video, a seminar or a blog article. 

No two companies’ customer experience is the same. A differentiated customer experience can make a big difference and a good word of mouth for referrals. How can you create a brand experience for your customers?

 The peace of mind that comes from knowing that support help is readily available and service is transparent.

Use this opportunity to add more value to your customers. It can be extra things that complement your product such as free templates or a free ebook. You increase the quality of your product with the extra goodies you provided with it. 

There’s always buzz when people make sales or drop prices, but it eventually dies down, and the one with the better product or service returns to the winning position. Remember having the lowest price only matters when you don’t have the highest value. Don’t fall for the price war trap. It's almost always more costly engaging in a futile price war that could destroy your business...