I think the best way to compete with a business offering the same products/service at a lower cost is to get your customers to think of your product/service as more than just a commodity

Figure: Supply and Demand Chart for Commodities Market

In the commodities market, lowest price wins almost every time because why would someone pay more for something when they could pay less for the same exact thing? This is a race to the bottom.

Instead, begin thinking about how you can differentiate your product/service to be more than just a mechanic shop, iPhone repair store, etc. What other intangibles do you provide that your competitors don’t? That’s where I would start. This is called “value pricing.”

From there it’s about building a culture and marketing campaign around those intangibles. The reason this strategy works so well is that, if you can deliver on these intangibles consistently well, it’s hard for the customer to quantify the value of what you offer. It no longers becomes an issue of price as it becomes an issue of value.

Value is a better pricing strategy because its impossible to quantify allowing the price to become less of a factor in the decision making process. In business, this is called the “customer perceived value”. And although it includes actual cost. It becomes more than just price.


Mario Ashley, MBA

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