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The $100 MBA Show
MBA2570 Q&A Wednesday: How Do I Handle Competitors Who Keep Undercutting My Prices?
00:16:45
Competing on price doesn't build great businesses; it destroys them. If you're constantly reacting to competitors undercutting your prices, you're playing their game, not building your own. But there’s hope! We've all been there, and in today's lesson, we're tackling this head on.
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- [00:01]
Dr. Emily Carter
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- [00:47]
Jim Thompson
And we're back, folks. It looks like Jim from sales just got in from his client lunch and he's got receipts. His next meeting is in two minutes. The team is asking, can he get through his expenses in that time? He's going for his phone, he's snapping a pic, he's texting around. Jim is fast, but this is unheard of. That's it. He's done it. It's unbelievable.
- [01:07]
Dr. Emily Carter
On ramp expenses are faster than ever. Just submit them with a text. Switch your business to ramp.com.
- [01:17]
Omar Zenhom
Competing on price doesn't build great businesses, they destroy them. If you're constantly reacting to competitors undercutting your prices, you're playing their game, not building your own. But here's the good news. There's a way to win without racing to the bottom. Today I'm going to show you how to stand out, attract customers, and stay profitable even when competitors are undercutting your prices. Welcome Back to the $100 MBA Show. I'm your host, Omar Zenholm, where we help you start grow and scale business with our practical business lessons three days a week. Monday, Wednesday, Friday. Today's Q and A. Wednesday's episode is a question from Vicki, who asks, how do I handle competitors who keep undercutting my prices? Vicki, I've been there. Competing on price is a losing strategy, but that doesn't mean you're out of options. Today I'm gonna share with you strategies to protect your margins, to position your business as the obvious choice for your best clients, and how to win loyal customers without feeling stuck and in a rat race to the bottom. Your first step is to stop competing on price when competitors undercut your price. The first instinct you have, I know because I've been there, is to lower your Price. Don't do it. Competing on price turns your product or service into a commodity. And the only company that wins in the price war is the one that can fund years of losses. See Walmart, for example, where they undercut all the competitors until they went out of business, but took years, nearly decades to make that happen. And most of us don't have decades of Runway to lose. We're not Walmart. Here's the thing. There will always be someone willing to charge less. So instead of lowering your prices, focus on increasing your value. I talk about this a lot because it's so important. Customers who choose purely on price, these are not customers you want, right? They're often the ones that are less loyal and will churn out anyway regardless of your price. They're just so unpredictable. Also not really seeing the value of what you offer. So I want to give you an action step for this first step of not lowering your prices and not competing on price. And that action step is to reframe your thinking. Okay. Instead of asking, how can I match their prices, ask yourself, how can I make my offer so valuable that the price becomes irrelevant? Step two. Differentiate your offer. This is something I learned from a book called Zero to One by Peter Thiel. And essentially what you're trying to do here is have no competition. Differentiate your offer. So it's so unique, you really can't compare it to something else. If you're selling a product or service, you're playing the same game as your competitors. But if you sell an experience or a transformation or something unique, you're in a league of your own. People will pay more for better experiences, for personalized service, for unique benefits. A good example of this is Apple. Apple doesn't sell the cheapest phones. They sell well designed, well crafted, good quality phones that are innovative and kind of are a status symbol. This is intentional, by the way. In Steve Jobs biography by Walter Isaacson called Jobs, he talks about how when he came back to Apple after being fired, it's one of the first things he wanted to do is create a league of their own. They don't sell cheap products. In fact, their margins are so high, a lot of people are like, hey, you can actually sell this for cheaper, get more customers. And he's like, no, I don't want to cheapen my product. I want to make sure that people understand that they're buying more than just a product. They're buying the best. So as an action step that you could take right now, identify what makes your business different. Is it your customer? Service? Is it the process your customer goes through to buy your product? Is it an added benefit your competitors don't offer? You need to highlight this in your marketing, in your sales, in all your messaging. For example, when I was running my software company, webinar ninja, for 10 years before we got acquired, one of our hallmarks was our customer service. We had the fastest response time in the industry. We're able to get people an answer or reply back to their email or their chat under two minutes, which was unheard of, still is till today. Most people would have been able to get an answer from one of our agents within 30 second sending a chat message. This really differentiated us and become one of the reasons why people came to us and paid our prices because they felt, wow, I can reach out and get help about anything when it comes to the software. By the way, it's live webinar software. So high pressure, I might need some help in the moment. And allowed us to be a product of our own. We're really differentiated with just one thing. Our customer service. All right, let's jump into the step three, which is focus on building trust. I've talked about this for the last decade, but at the end of the day, business is all about building trust with your potential customer so that they can feel like they're making the right choice by choosing you. Customers are more likely to buy from brands that they trust. It's just that simple. Even if the brands charge more. Okay, we see this all the time. Trust comes from consistency, transparency, and delivering exceptional results time after time. When a customer trusts you, they're less likely to shop around on price or less likely to shop around. And even look at the other competitors in the market. They know they're gonna get value and they know it's worth paying for. For example, if I need to buy a new computer, I'm not thinking about buying another computer other than an Apple computer. Right. I'm not going into the market and, you know, comparing other PCs, other manufacturers, because I've been using Apple computers. I trust them, their quality. I they're different because they have really good privacy measures. They last a long time, they're fast, they're easy, and they happen to be the most expensive. And this is a really good reason why they're most expensive, because they can demand that kind of price. People are coming to come back to them. They're going to trust them because they've earned our trust. Another example is when I was building my software company, Webinar Ninja, we focused on educating our customers through free webinars and content that we created, courses and videos and all kinds of stuff. This built trust and loyalty with our audience. So price wasn't really the factor for the customer because they were thinking, hey, I can really trust these people because they know what they're talking about. They've already helped me with the content. All I need is to apply the information that I just learned with their software, their product. So as an action step for you, start building valuable trust building content. Now you don't have to start a podcast or a YouTube channel. You could start small by just having a really good FAQ section on your website or gathering some really good testimonials and displaying them on your website or case studies for example. Or you can create some really good how to guides on your blog. This is really low hanging fruit that allow people to really chew on something when they get to your website and say, wow, these people actually know what they're talking about. You're addressing customer concerns and you're showing the value that you bring.
- [08:49]
Sarah Johnson
Got a 7am meeting on a Monday expensing breakfast because it's in policy wasting all afternoon submitting an expense report for that breakfast. If your company used Ramp, you could submit expenses with just a text.
- [09:08]
Omar Zenhom
Yay.
- [09:10]
Dr. Emily Carter
Free your team from expense reports today. Switch your business to ramp.com.
- [09:21]
Omar Zenhom
Step four we talked about the theory. Now we're going to talk about the implementation of adding value without lowering prices. When faced with price competition, add value. Instead of lowering your prices, offer extras and and benefits that your competitors don't. And this makes your product or service irresistible. By doing so, by adding value, you can justify your price and make your customers feel like they're getting more for their money. They're actually getting a better deal. For example, if you offer free training or extended warranties or guarantees. If you have personalized consultations or support, you can make your offer really stand out. Where you're not just giving them a product and leaving them high and dry. They have everything they need to succeed. So as an action step, think about what extras you can include with your product. Your offer that costs little to you but is high value to your customers. You want to bundle these with your core offering. This could be a short course that allows them to get up and running very quickly and get the value from your product or service right away. This can be a template of some sort to make their life easier. So for example, one of the features inside of our software, Webinar Ninja, are email notifications. Basically email marketing within the webinar software, sending out reminders, sending out my follow up email, sending up replay emails to those who registered for the webinar. We created scripts for our customers so they can just copy and paste it, pop it into the software, saving them time, singing them energy. You can think of some really cool ChatGPT prompts you can give them to speed up their success, to apply it to your product to make things easier for them to get to where they want to go. Step 5 Target the right customers. Not all customers are equal. Okay? This is something I learned in over two decades of running businesses and entrepreneurship. There are some really good customers out there that are amazing to have and there are some customers that will absolutely drive you crazy, all right? They will make you want to just shut your doors and never be in business. Okay? They're that bad, they're that draining. They're probably 10 or 20 times more work than the average customer. And in my experience, the most pain in the butt customers are the ones that are super sensitive about price. They are trying to ask for you to take them to the moon and back for $50 or something. No, that's not reality. Okay? So not all customers care about price. This is something that took me a very long time to understand some. Prioritize quality, service, convenience. Focus on attracting customers that care about these things instead of bargain hunters. All right? The funny thing is that my parents were polar opposites. My mom loves a good bargain. My mom clipped coupons. She went and bought things only on sale. Went to the clearance rack as soon as she went to a store, straight to the back clearance rack, right? My dad, on the other hand, never bought anything on sale. He just never did it. He was allergic to it because he felt like if it's on sale, it's not good, nobody wants it. That was his mentality. He was looking for quality. He was looking for something that was unique, something that not everybody has. When a salesperson would tell him, oh, this product is really popular, that was a turn off for him. He was like, no, no, I don't want that. So my dad is actually a really good customer to have because he's not price sensitive. He's willing to spend more if he's going to get more. Customers who prioritize value over price are more loyal, they're less likely to churn, and they're more profitable in the long run. And get this, it costs you just as much to acquire a good customer versus a bad customer. And good customers will continue to buy over and over and will not give you headaches. And cost you money and time and energy to service. So as an action step, I want you to create customer profiles to identify who are your ideal buyers, who are ideal customers and you want to tailor your marketing and speak directly to these profiles, to these people with these specific needs. For example, me at the a hundred dollar MBA. I sell a program called $100 MBA. One of my profiles is the busy professional making good money but is trapped in the rat race and wants independence, wants time, freedom, wants flexibility, is not being appreciated at work and their skills and they've been moving up the ladder but they're not really going anywhere. They're afraid that they're going to retire with not much and they want to switch gears and build something for themselves. That profile is not price sensitive. They have money, they are willing to spend it because they have an urgency to start changing their life and they're a quick study. They have already moved up in their career. They are willing to work hard for what they want. Final Step Step six Position Yourself as a Premium Brand I talk about this a lot in my trainings, in my webinars, in my videos, in my podcasts. I've been talking about this for years and a lot of people don't understand exactly what I mean. So I'm going to clarify right now. If you're competing on price, you're in the wrong market. Bottom line. That's it. You need to position yourself as a premium option so that you can elevate your branding, your messaging and and your customer experience. Why? Because as a premium brand, you can afford to reinvest in your branding, your marketing, your messaging, to have the best designers, to design your website, to have the best service, to have the best products out there because you're reinvesting in it. But when your margins are thin and you're not charging a decent amount for your products or services, you cannot reinvest and look like a premium brand. Here's the bottom line. Premium brands command higher prices. They attract customers willing to pay for quality and they will trust you for longer because your product or service is quality. Think about products like Louis Vuitton or Mercedes or Rolex. If you don't know about these brands and how they operate, you can't just walk into the store of Rolex and buy Rolex. No, you can't just do that. You either have to get on a waiting list for 18 to 24 months. And if you're a first time buyer of a Rolex, it's very hard for you to buy a Rolex you have to buy a certain Rolex which is at a certain level. And then once you buy your first Rolex, then you can buy more Rolexes at a higher range. You can't just jump in and get the most expensive thing. Very hard to do. Why do they do this is because they know they can and they can charge premium prices and there's such a high demand. They can't just be giving out Rolexes like it's candy. They then it has no value. So if you want to be a premium product, you got to act like one, you got to look like one. Okay, so as an action step, audit your website, your social media, your customer touch points. Does everything reflect premium quality? If not, you got to invest in improving your branding and your presentation. This is the first step to look the part so people can take you seriously. I'll be honest with you guys, we were not a premium looking brand, the $100 MBA for a very long time. And then I had to change it. I said, I took this advice, I took my own advice and said I got to change things, I got to start looking the part. So we reinvested in our business, in our branding, we revamped the whole website, we hired the best designers, the best developers, the best people to put this all together. And now we look like the best in the world when it comes to business education. And here's the thing, if you are premium, you can charge anything you want and it makes it easy to sell. Whether it's high prices or even just market prices. It's going to be such a no brainer. So Vicki, you asked today's question and my answer is very simple. Price wars are a trap. But you don't have to fall into that trap. You can focus on value, you can differentiate yourself, you can build trust, you can have premium positioning and build a business that's resilient to this type of price war. The customers that you track this way won't just buy from you, they'll stick around. And remember, great businesses don't compete on price. They compete on value, experience and trust. Thanks for tuning into the hundred dollar MBA show. If you love this episode, you've got value from it and you want more practical business lessons to start, grow and scale your business. Just hit subscribe where you're going to get those episodes automatically. It's absolutely free. Whether you're listening to this podcast right now, go ahead and make sure you hit that subscriber follow button on Spotify or Apple or you're watching it on YouTube. We have a YouTube channel that publishes every single episode on video. So if you prefer video, we're on YouTube. Just search the $100 MBA and subscribe there. I'll see you in the next episode. Until then, take those action steps and keep moving forward.
- [18:35]
Sarah Johnson
Got a 7am meeting on a Monday? Expensing breakfast because it's in policy.
- [18:42]
Omar Zenhom
Yay.
- [18:43]
Sarah Johnson
Wasting all afternoon submitting an expense report for that breakfast. If your company used Ramp, you could submit expenses with just a text.
- [18:55]
Omar Zenhom
Yay.
- [18:57]
Dr. Emily Carter
Free your team from expense reports today. Switch your business to ramp. Com.