How To Compete On Price

Competing on price is about more than just being cheaper than your competitors. The notion of competing on price alone is frequently frowned upon as the quickest way to sink a small business.

So what are the implications of competing on price? How should you go about it and why is it not a great idea just to be cheap? After all, if big brands like Tesco and Asda can build an entire reputation on price-based competition and marketing, why shouldn’t you be able to?

Quite simply, you are not Tesco.

The best way for small business owners to attract new customers is to offer competitive pricing, not just low prices. There are a number of factors to consider when pricing your products and deciding how to advertise your prices. So what are the advantages and what are the disadvantages of competing on price?


Selling on price is the number one Do-Not of SME marketing. Business owners are becoming increasingly focused on customer loyalty and repeat business. Many small businesses rely heavily on repeat business, recommendations and referrals and marketing your business based on price is not likely to support this business model. Rather, these tactics drive disloyal customers, as you attract price-aggressive patrons whose only concern is the best bargain and lowest price.

For this reason, competing on price alone is likely to have a negative impact on your business because you will find it more difficult to build a loyal following.

In addition to this, it is important to remember that it is impossible to be the cheapest vendor on everything. You will see smaller profit margins than your competitors and will effectively be giving away value for free. This makes little sense in the world of business.


Consider your business’s reputation in your area. What are you known for? When you compete on price alone, low prices become synonymous with your brand and, well… that’s all. You become known as “cheap,” rather than “expert,” “good quality,” or (best of all) “good value for money.”

This creates rather a one-dimensional image for your company. More than one selling point, on the other hand, will reach more potential customers as it will attract different people for different reasons. Sell to people’s emotions as well as their purse: offer them solutions to problems, happy times and an easier life. Make it clear that as well as offering a good price, your products give them something no one else’s can.

It’s not about price: it’s about value

This is the most crucial thing to remember. Your customers do not buy on price alone, but make their decisions based on a myriad of factors. There is a difference between being the cheapest supplier and offering the best value for money.

Perhaps you have been working in your industry for thirty years and can offer a level of expertise and insights that your competitors simply can’t. Perhaps in addition to charging for one product, you offer a second for half price.

Be aware of how your competitors price their products and price with reference to theirs’. As noted above, you can’t be the cheapest for everything, but be clear on what products or services you are cheaper. The point is that you should offer something different than your competition – you should come across as though you offer more: distinguish yourself from competitors by being better value, better quality or better priced.

What do you think?

Is it possible to compete on price alone? Would you want to just because you can? Do you think that companies offering lower prices are less likely to see a healthy bottom line?

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