How to get a sale when you can’t compete on pricing

I want to preface this by saying some of you actually can compete on pricing, but I think you should already know if you are one of those people. For the vast vast majority of you, your will not be competing on pricing. You don’t have the economies of scale, or new patented research, or even tons of funding to get into a price war.

This is perhaps the hardest lesson of all to learn as a new entrepreneur.

When your just out of college or any age below you don’t have much money. You likely never had a real job and have lots of time. So how do you shop?

You look at what the cheapest thing possible is and spend more time making that work for you.

Me and everyone I knew acted like this. We slept on couches, at the cheapest, bed bug ridden landlord slum apartments as close as possible to the city. When traveling, we looked for the cheapest airbnb option we could find. We ate at Mcdonald’s, not Michelin Restaurants. I bought the cheapest $5 t-shirts I could find that fit me.

When searching for startup ideas and trying things out, you think about your own world. How can I provide cheapest possible thing? Because that’s how I live.

You never consider there is a whole world of rich or even moderately wealthy people have so many reasons they will willingly pay a premium for things.

Let’s say you are selling a boring old table. The cheapest one available to a potential customer is free on craigslist. Why would they pay you instead of getting this free table?

There almost unlimited things to offer besides being the cheapest option

  • To save them time – You will deliver to them instead of them driving to this table. Your table is delivered right to their door.
  • It is easier – Your table can be assembled in 30 seconds without using any screws or wrenches.
  • To reduce their risk of something bad – Your table says it has a lifetime guarantee. Free returns. What if the free table has bedbugs?
  • To help the world – Half your profits go to a good cause. You use recycled wood and plastic. It will fund your next environmentally conscious product. Your hire former inmates and teach underprivileged kids woodworking.
  • They like you – They know you are a one person shop running out of a garage and spend hours making the best damn table you can. You have funny advertisements.
  • You fit their very specific requirements – Your table dimensions perfectly fit their odd shaped synthesizer. The dimensions are perfect for their chair and the corner of the bedroom it will be in.
  • They trust you – You respond to all of their questions within the same day. You post free material about how to decorate your table and properly clean it and even give lessons on that odd shaped synthesizer.
  • They are impressed – This is brand new design that you invented. You are selling 100 of these. They can show it off to their friends.
  • They have no choice – Their significant other won’t let them take a free table off craigslist. You are the only approved vendor.
  • You were recommended – You have the best reviews. Critics love you. Their favorite table influencer talked about you. Their table peers bought from you.
  • They found you when they needed you – You marketed to them right at the moment they were shopping for tables. You sponsored their Google and Amazon search results. They didn’t even think about craigslist.
  • You offer something extra they like that no one else does – You have a beautiful unique pattern on the table.

You will also notice some of these apply doubly so a returning customer like the risk of another table causing them harm or that they now trust you more. That’s why it is always better to retain an existing customer than to find a new one.

That’s not to say pricing does not matter at all. You still have to price it reasonably for what you are offering. You just don’t need to be the cheapest.

If this is still hard to wrap your head around, look at everything you and everyone you know purchases. There are going to be a few things you buy that aren’t the cheapest around. You are going to pay $10 for Chicken tenders at that joint by your dorm instead of buying it from the grocery store and cooking it. You are paying $8 for a beer at your local bar instead of drinking at your apartment.

Think about all these things you do and consider what you can try with your product. What don’t you see any competitors doing? Would that help? Sometimes no competitors are doing something because that doesn’t matter to your potential customers.

If in doubt, the best bet will always be to go for easiest. Think of different ways that your potential market can get what you provide easier.