By Jack LaRue

Are you getting undercut by bargain-priced competitors? Then we’ve got a television commercial you should see. You might remember the Office Depot commercial that features a small barber shop owner, Dan, looking out across the street where a large chain is opening, advertising $6 haircuts. Dan doesn’t think he can compete with a $6 haircut. But then he has an idea. He goes to Office Depot and buys a large sign to hang outside his barbershop: “We Fix $6 haircuts.” The large chain closes five months later.

i really like this ad. The initial thought of many people faced with a competitor reducing prices is "match the price or lose the sale." But most times that’s a sucker bet. By matching price, you concede that quality is the same (or close enough). Dropping prices will surely eat into your profit, and you might find yourself lowering quality to compensate. It’s a slippery slope that can do significant damage to your reputation.

But Dan the barber was smart. He didn’t succumb to the temptation to compete on price. He decided to compete on the area that he excelled in – quality. It reinforced his business and his pricing and painted his competitor into a corner. After all, we all know you get what you pay for.

Like most businesses, you are faced with increased competition every day, whether it is do-it-yourself software, a storefront operation, or perhaps a new accounting firm just opening up in your vicinity. And those who have nothing else to compete with often choose to compete on price. That might be a bit tempting for some of your customers, particularly during a time when money is so tight.

Don’t be lured into playing that game. Instead, you need to figure out a way to change the game and compete on your terms. Reinforce your core positioning and force your competitors to react to you.

About the author:

Jack LaRue is the senior vice president, myPay Solutions, at Thomson Reuters Tax & Accounting.

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