Price. It’s a reflection of the added value. It’s determined by the buyer.

This leaves us with two options in a competitive market. The easy option is to decrease our prices through efficiency and scales (or lower profit margins in exchange for volumes). In the long run, this is not easy. Our business is squeezed to the bone. We cannot hire the best anymore due to the premium on their skills. We cannot afford to develop the skills we have due to the cost pressure this creates.

Soon enough we are not able to offer the lowest prices anymore.

The alternative is hard work. It requires us to add value to justify higher prices. Since value is determined by the customer, we cannot add the value we think is valuable. We need to know our customers. We must understand their challenges in depth and come up with solutions they do not know to ask for.

Compete on price in a frantic race to the bottom, or compete on quality. You might find it quite lonely and very rewarding.

Holger Link

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