The Race to the Bottom: Why Competing on Price is a Losing Game

March 3, 2025 | Read Online

Read time: 4 mins
Welcome back, folks! 🫡
This week’s Business Builder covers:

• 🛍️ The Race to the Bottom Fallacy

• 📉 Why Competing on Price is a Losing Game

• 🔥 How to Build a Business That Commands Higher Prices

• 🤖 Market Strategy of the Week

Let’s dive in… 👇

The Price War at Bolton Market

This weekend, I visited Bolton Market—a proper old-school marketplace, bustling with energy and packed with stalls selling everything from fresh produce to knock-off designer clothes.

I went to buy some fruit. One stall had bananas for £1.50 a bunch. Two stalls down, another vendor was selling them for £1.20. Walk a little further, and someone else had them for just £1.

A textbook price war.

It got me thinking about how businesses that compete solely on price are in a race they can never truly win. Because there will always be someone willing to undercut you.

The Problem with Competing on Price

At first glance, being the cheapest might seem like a good strategy—after all, people love a bargain.

But here’s the problem:

• If your only advantage is price, you’re disposable.

• The moment someone offers a lower price… you lose.

I’ve seen this happen time and time again in business.

A Tale of Two Business Owners

Let me share a story about two business owners and how their pricing strategies shaped their success (or failure).

The Business That Collapsed

The first was obsessed with being the cheapest. Every time a competitor lowered their price, he panicked and dropped his too.

• His margins shrank.

• His stress levels grew.

• Eventually, his business collapsed because he couldn’t make enough profit to sustain it.

The Business That Thrived

The second owner took a different approach. He knew there would always be someone cheaper, so instead of playing that game, he built his brand around quality, service, and expertise.

His prices were higher… but customers happily paid because they saw the value.

✅ The result? A thriving business that wasn’t at the mercy of price wars.

How to Escape the Race to the Bottom

If you want long-term success, you must break free from competing on price. Here’s how:

1️⃣ Differentiate Yourself – Find what makes your business unique. Is it better quality? Exceptional service? A niche market? 2️⃣ Communicate Value Clearly – Show people why you’re worth the price. 3️⃣ Build a Brand, Not Just a Business – People don’t just buy products; they buy trust, reputation, and experience.

If your business is stuck in a price war, now is the time to rethink your strategy. Because the cheapest isn’t always the best. And businesses that win in the long run? They don’t compete on price. They compete on VALUE.

Next Step: Reflect & Take Action

Take a moment to reflect on your business:

• Are you competing on price, or are you standing out in a way that makes people willing to pay more?

Try this:

Write down three things that make your business different from your competitors. If you can’t think of three, it’s time to start working on what sets you apart.

The strongest businesses don’t race to the bottom—they rise to the top.