Many businesses want to be known as the cheapest, they want to be the big fish in the big pond even if it means making tiny margins. Growth in market share and sales value is everything and constantly reducing prices and comparing their prices with the competition is an obsession. The supermarket industry is a great example.
The trouble with this race to the bottom is it is one that nobody can win. Where will it end? Will businesses eventually have to pay customers to take products away? Well that has already happened – just look at the BOGOF offers. Buy One Get One Free.
What possible satisfaction is there in a business where you know the only reason your customer buys from you is that you are the cheapest? How long is this sustainable?
Many race to the bottom businesses are about to come unstuck. Their business model of rapid growth based on tiny margins, high borrowings and constant growth is unsustainable. Just look at how many electricity suppliers went under when the first price rises hit and that was before the current traumas and of course interest rate rises.
Far better I feel to be a business where you give the customer a reason to buy from you that is not just price based. Concentrate on quality or service or having a unique or at least differentiated product. Why don’t you see Apple or Ferrari reducing their prices? Answer – their customers buy from them despite their high prices.
If you want to get involved in a race to the bottom then remember that not only are there no prizes for winning but the winner can just be the one that goes bust last.
The race to the bottom is one with no prizes.
How will you avoid getting involved in that race?
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