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race to the top

Race to the top!


Last week I talked about the depressing race to the bottom. That’s a strategy of focusing on reducing prices over all other considerations.

When several companies do this at the same time, it destroys profit for everyone and can even kill an industry. We see this all the time.

Fortunately, there’s a different strategy you can embrace. It’s not any easier, but it sure can be more rewarding.

If you’re smart and focused.

This is a strategy of pursuing customer value. To do this well, you have to be intimately tied with your customers – to the extent that you may even understand their needs better than they do.

At the same time, you have to be humble, because it’s easy to think that you’re smarter than they are. I don’t care how smart you are; at the end of the day they’re still the one which makes the decision to purchase from you.

You have to become very clever about solving those customer problems in a way which is compelling and cost-effective. Because there are also many “high end” businesses which die as soon as customers figure they’re not getting enough true value.

When people think about this strategic choice, they often ponder whether they want a large market share where they’re selling a million products for $10 apiece, versus just a specialized portion of the market where they’re selling 10,000 products for $100 apiece. If you do the math, that first is $10M, while the second is just $1M. So the choice seems clear: go for the high volume.

It also makes you feel important when you measure success by market share.

But profit – which is your company’s sustainability – doesn’t work that way. And you know it too. In the high-volume case, you could easily be making just a few cents’ profit, while a lower volume specialized market will probably reward you with higher per-unit profit as well as overall profit.

If you’re delivering compelling value.

If you create the relationships where customers are loyal rather than price-driven.

You get to choose how you play this game. And even though I’m clearly biased towards this “race to the top,” I also have plenty of places where I’m driven to purchase the lowest-priced goods.

Because nobody’s given me a reason to care more about value. Yet.


I’ve written an e-book which gives you six specific ways to build an amazing, powerful, profitable business that will change the world.  Check it out!

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About the Author

Carl Dierschow

Carl Dierschow is our Small Fish Business Coach in Colorado in the USA. With over 17 years of experience in professional business coaching, he helps clients around the world to build profitable, powerful, sustainable companies. You may want to check out his targeted blogs at www.valuesbased.biz and www.nocosmall.biz.

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