The rise of the internet and ecommerce has led to a sharp increase in competition in virtually every industry imaginable. At the end of the day, competition is a good thing. However, it also forces you to step up to the plate and differentiate. In doing so, you’ll be confronted with a decision regarding whether or not you’ll compete on price.
You Won’t Win on Price
Unless you’re a rare exception, you aren’t going to win a price battle in today’s marketplace. Between Amazon, Walmart, Alibaba, and other massive retailers around the world, price is something small and medium-sized businesses can no longer use as a long-term strategy. All it takes is one of these companies to step up and lower their prices to knock you out.
Honestly, you shouldn’t want to compete on price anyway. Competing on price means lowering your profit margins. In order to increase revenue with lower profit margins, you have to do more of everything – including manufacturing, sales, marketing, customer support, etc. The better strategy is to compete on value.
3 Ways to Compete on Value
Competing on price seems easier at first glance. You simply lower input costs and increase sales volume. Nothing could be further from the truth, though. You’ll expend a ton of energy trying to become a price leader in your industry. The far better play is to compete on value.
- Carve out a Niche
“If you have the lion’s share of a particular market, you have more room to set prices. If there are 20 or more sign and digital graphics shops in your city, you’ll face constant price competition,” explains Garston. “But if you’re the only shop specializing in brilliantly colored, one-of-a-kind, custom-designed banners and signs with fast turnaround, you’ll face much less price pressure.”
The moral of the story is that you need to carve out a niche if you expect to compete on value. It’s better to develop one high-quality product or exceptional service than it is to offer a bevy of average solutions.
- Invest in Better Customer Relationships
“Successful brands like Apple and Starbucks are selling you much more than just computers and coffee – they’re selling you the entire experience of interacting with their brand,” Envision points out. “Everything from Apple’s sleek, white packaging to Starbucks’ warm, cozy atmosphere is part of the brand experience.”
Customers gravitate towards brand experiences that make them feel valued on a personal level. According to Envision, there are two foundational elements to a magnetic brand experience: personality and consistency. As you attempt to compete on value, start by ensuring your brand experience embodies both of these characteristics to the fullest extent possible.
- Communicate a Clear Promise
When a customer lands on your website, reads one of your email marketing newsletters, or studies your product packaging, they should see a clear-cut promise from your brand. In other words, they should know exactly what you’re guaranteeing them. If you don’t have a compelling promise that’s driven by a specific audience pain point or desire, you’ll find it nearly impossible to compete on value.
In addition to communicating a promise, you need to consistently deliver on that promise. Customers notice when you don’t deliver and your brand image will quickly become watered down.
Putting it All Together
It’s time to stop competing on price. You’re playing a losing game in which you’re entirely underleveraged. Larger brands like Amazon can flick you away whenever they please. As you reevaluate your strategies this year, begin thinking about value as a more sustainable sales differentiator.
You’ll find the long-term yield to be much more rewarding and sustainable.