Don’t compete on pricing, it never pays

After I finished my presentation on how entrepreneurs can use innovation to leverage in the market, a young lady posed her concern.

She explained that she had tried many innovative ways but her nuisance competitors kept frustrating her by copying nearly everything she did and capitalising on her ideas and marketing innovations.

I paused and remembered what one of my business mentors told me years ago. He said that where he came from there were many monkeys, squirrels and several rodents that kept maize farmers on their toes from the time they sowed the seeds to the time they harvested. Yet, what inspired him most is the fact that no farmer failed to harvest maize because of those enemies competing to get a share of his husbandry endeavours.

Like a good farmer an entrepreneur should be undeterred by copycats, imitators and greed merchants who try to get their customer by copying their marketing strategies or by undercutting through offering lower price. Of course, it is not fair for others to imitate your ideas or copy your products and marketing strategies to profit from your efforts. But since people will do it anyway, it is good you accept that reality and find a way to deal with it.

First, just like a farmer you have to continue fighting the enemies without losing focus. You have to find more innovative ways of dealing with competitors who apparently cannot come with their own ways of survival.

They fact that they copy from you means you are smarter than them. So, run first and let them trail behind.

Pioneers of new ideas and innovation in the market have advantage of being their first to capture market needs and attention. But they have a share of their woes too. As the adage goes ‘they get arrows in their backs.’ It pains to see people compete you on price especially after you have spent time and money on research and product development to get at it.

However, do not be tempted to compete on price. It never pays. Most of those who compete on price actually do it blindly without looking at long term consequences. Some are ignorant of their actual cost of production or what makes customers want to buy. If someone tries to outdo you on pricing, intensify you value and you carry the day.

Sometimes you don’t have to create new products. You just need to present your existing products in new innovative way. This is one way of creating value and staying abreast of your competition.

In order to understand your customers and their needs, you need to stay close to them. One of the single greatest weakness of most business owners and managers is not staying close or in touch with their customers. They leave customers to interact with sales people, delivery guys and accountants who hardly have time for customers in their haste to meet targets.