How to Beat Your Lower-Priced Competitors

When rival companies step on your toes by offering the same product for a lower price, the easiest solution is to match their number or go even lower. But that’s also the worst solution. You may look at a company like Walmart and think, “If they can do it, why can’t I?” Walmart is a rare specimen that has mastered scalability based on the massive quantity of products they sell. Instead of jumping on the Walmart train of thought, which could send your company flying off the tracks, evaluate your own company’s margins. Then protect this evaluation with your life. You can reduce prices, but at the end of the day, you may be repeating the old adage, “We’re losing money on every sale, but we’ll make it up in volume.” 

Beware of Price Wars

If you feel you absolutely must lower your prices, there are overhauls that come with making that work. For example, if your competitor begins outsourcing its manufacturing to China, you may want to outsource to a country that may be cheaper. But in doing so, make sure you are not sacrificing the quality of your product. You might think otherwise, but lowering your prices is usually not the answer. It just creates another major problem: price wars

Price wars can have two positive outcomes: they can increase market share, and they can temporarily increase revenue. But employing this tactic can be incredibly risky, especially for a small business. When you respond to a competitor’s lower price by matching it or going cheaper, you are inviting them to go even lower. Your response will be to drop your price yet again, and the resulting domino effect can ultimately put you out of business. 

Rideshare services Uber and Lyft have currently engaged in an intense price war. They built their businesses based on cheaper fares than taxis. However, as each company drops its price to beat its rival, they have to drop them again and again. Because of a lack of competition and their relative sizes, they can handle this. But most small businesses don’t have those luxuries and thus can’t afford to compete. 

Even then, you can’t ignore the disruption caused by competitors undercutting your prices. Unfortunately, it’s a problem that simply won’t go away. But that’s okay. There are a number of strategies you can implement to keep customers knocking, and none of them involve lowering your price: 

1. Create an Even More Compelling Product 

Consumers will cough up more money if they truly believe your product is better than the competition. Your product advantage can be tangible, offering a feature that no one else does. Or it can be an intangible benefit, like the perception of having a better product reputation, like Apple and their iPhone line. Either way, you can’t compete until you research the competition. Look at your competitor’s product. What is it missing, and how can you use this to your advantage? Making your product different and better can change its perceived value in your customers’ eyes, therefore justifying a higher price. 

2. Give Your Product a Convenience Factor 

This idea can be applied to both the purchasing process and the actual use of the product. Today’s world is addicted to convenience. Thus, people are willing to pay more money for products that make their lives easier or are even offered in a convenient way. Think of how DVDs are offered in supermarket checkouts to generate impulse buys. It’s quick and convenient for your customers, and it’s profitable for your business. 

3. Educate Potential Clientele 

Larger competitors are often stuck with corporate cultures that make it difficult to connect with their clients on a more personal level. You can take advantage of this by educating the client about the product or service they are seeking. The more that people understand what they’re buying, the more comfortable they will feel in spending money. People buy lower-priced goods because they don’t see any difference between them and more expensive alternatives. Therefore, teach your clientele why your product is better. You can offer seminars, demonstrations, brochures or even tours of your facility. 

Just make sure your efforts are genuine and don’t come across as a sales tactic. Give people the benefit of the doubt, as they will notice a desperate attempt to sell more products. If they feel misled, they will head straight to your competitor. 

4. Give Your Salespeople a New Title: Specialist 

Let’s be honest, consumers are wary of salespeople. People want to be guided, not sold. One way to entice customers is to eliminate the “Salesperson” title from your business altogether and replace it with “Specialist” or another term like it. Specialists teach; they do not sell. As opposed to salespeople, specialists go to great lengths to understand their client’s needs. If your client feels like he or she is being taken care of, customers will gladly spend more money. Beyond this, they will refer others your way. 

5. Establish and Stick to a Unique Selling Proposition 

A Unique Selling Proposition (USP) “states very specifically why your product or service will matter to the consumer. It communicates to customers how your product or service is better or different from similar ones that are currently available on the market.” Knowing and fulfilling your USP at all costs is essential, as it portrays your value to your customers. If your USP revolves around all-star customer service, you can’t make cuts to it in the name of lowering your prices. Instead, you should find cost-effective ways to improve it. 

Lastly, Don’t Do the Following 

A vital part of your master plan is to make a list of things not to do: 

  • Don’t wait for competitors to attack you. Be proactive, and create a strategy to deal with pricing issues.
  • Don’t act before formulating a plan.
  • Don’t overlook potential competitors.
  • Don’t overlook non-competitors. They could strike while your guard is down.
  • And of course, don’t lower your prices without understanding the consequences. 


It is crucial that you understand what type of business you are in and where the market is going. Price usually matters when dealing with commodities, such as grain or oil. As a product becomes commoditized, the consumer will tend to buy the cheapest priced item, since all products are seen as very similar with little differentiation. If your product is going in the direction of a commodity, the entire market is shifting, meaning you and your competition may not have any power to stop prices from falling. 

This often happens with technology. As new technology comes out, the companies that cannot keep up with the latest innovations often fall by the wayside. At the end of the day, if this is happening to your business, the best you can do is get out of that market or change your business model.


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