Don't copy the competition

27th April 2022

I was talking to a prospective client recently about what they charge their customers...

He’s in a highly competitive industry with tight margins.

And he really struggled to keep his prices in line with his competitors’.

“I’m sure that if I charge much more, I’ll lose half my business. There’s a lot of choice in this market,” he told me. “So I keep a close eye on what others are charging and try to match them. The problem is, there are months when I’m not even profitable...”

I looked at this highly capable, but obviously stressed business owner...

“Joe,” I said. (Ok, that’s not his real name, but it’ll do.) “I have a secret to tell you...

“You’re trying to match your pricing to your competitors’ pricing. But meanwhile, your competitors are all BROKE! So why copy them?” After a moment of shock, he burst out laughing...

It was an “aha” moment.

There’s a lesson here every company can learn...

...especially right now, when the economy is shaky, everyone’s costs are climbing and the pressure to raise prices is huge.

Again and again, I see companies trying to copy the competition - not just with pricing but also with their marketing, the services they offer or even their business model.

Don’t assume, without any real proof, that your competition knows what they’re doing!

It’s equally likely that they’re just making things up as they go along...

Or that they’re making some horrible strategic mistakes...

Or that they’re watching you and assuming you’re the one with all the expertise!

When it comes to pricing strategy, of course you need to be aware what your competitors are charging, because you need to understand what alternatives your customers have. It’s one of the 3 “C’s” which inform your pricing, together with your own costs and what your customers are willing to pay.

But it’s dangerous to simply match your competitors blindly.

They’re likely under the same pressures as you. If you’re in an industry known for tight margins, chances are that they’re struggling as much as you are - or more.

In a competitive market, it’s far smarter to find a way to remove yourself from the competition...

...For example, finding a way to make your products or services more valuable than others are offering...

...Rethinking the way you charge (eg., by the hour / by the project / creating group programmes rather than 1-to-1 services / billing on a different schedule etc)....

...Or repackaging what you do in a completely different way to the competition, so your customers are no longer comparing apples to apples.

All these methods allow you to charge differently - and to charge more.

Pricing can be difficult to get right, because it’s as much an art as it is a science. But it’s absolutely critical that you think it through carefully - with reference to real data and real numbers, not just based on gut feeling.

Then test your assumptions to see what the market can truly bear.

Your business will be very stressful to run and may not even survive if you’re consistently under-charging.

Pricing is one of the things we work on when we manage your company’s finances, because we’re here to help you grow faster - and maximise your profits!

If that’s the kind of expert financial management you’re looking for, hit ‘reply’ to email me today on 01279 647 447. We’ll have a no-obligation chat about your situation - and how we can help you.

Warmly,

Garry


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