In this blogpost, I’m going to talk about why you should race to the top and not to the bottom.
What do I mean by racing to the top Vs racing to the bottom?
In any give market, most people compete on price. The problem, with only competing on price and trying to be the cheapest, is that the only way to win is by constantly lowering your price. Because, as soon as someone else in the market has a cheaper offer, that is similar to your offer, you’re essentially doomed.
What this creates is a race to the bottom. Where everyone is lowering their prices, and everyone’s profit margins get smaller and smaller. As Seth Godin says, the problem with racing to the bottom is that you might win. What that means is that your margins will eventually become so thin, that it’s very hard to even stay in the market, unless you’re the biggest player. Or unless you have the same infrastructure, the same systems in place, the same advertising budgets and the same ability to operate of a big company. So, especially if you’re an expert, a coach, a consultant and you sell intangible products, the worst thing you can do is to participate in this race to the bottom.
Race to the top, by competing on value
What you should do instead, is race to the top. So, while everyone else is racing to the bottom and try to compete on price, you need to be racing to the top and that means competing on value. Instead of trying to be the cheapest, try and position your brand, your company, your product or offer as the most valuable offer in your market. When you compete on value, you can charge as much as you want. Because when people believe something’s valuable, they will almost pay any amount of money for it, even if someone else has a similar offer that is cheaper.
For example, think about cars, a sports car that cost so much more than a regular car. In terms of the ability of the car to get a person from A to B, a sports car and a regular car are pretty much the same. The sports car will get you there faster and with more style, but at the end of the day, the reason why sports cars are so expensive, is for the most part because of the positioning. Because these companies are competing on value and not on price. They’re not trying to be the cheapest in the market. They’re positioning themselves as a luxury car brand and because of that they charge 10-20 times more than everyone else. And why are people willing to pay that much? Because they believe in the value of those sports cars.
The good news is, you could do this in almost any market. You can be that luxury brand. You can race to the top and increase your prices.
Don’t undercharge and double the price
The other day, I was talking to one of my clients and he did a really successful launch. He made about $20K, he is in the crypto space and he then launched another membership, which he massively undercharged for. So, I told him to double his prices. In general, this is something you should do all the time, just double the prices of whatever you are selling. Especially if you’re a coach, if you’re selling online courses or coaching programs, just double your prices and you’ll see that most people will still be willing to pay, for the same product and double the price.
Often, we’re scared to charge more, we’re scared to increase our prices, because we have imposture syndrome or we don’t fully believe in the value of our online courses or our coaching programs, or just because of plain old fear.
Challenge: participate in this race to the top!
I want to challenge you to participate in this race to the top. Where instead of constantly lowering your prices, you try to constantly increase your prices. Make up for that increasing price with a more valuable brand with more valuable positioning. By just constantly increasing the perceived value of your offer, so that people are willing to pay those higher prices.
Because, if you’re racing to the top, guess what, that’s a lot more fun than racing to the bottom. You are now positioned as a market leader, you’re now standing out from all those other people that are just competing on price and your profit margins will be through the roof.
That means you can spend more to acquire customers and clients. You can outspend everyone else because they are racing to the bottom. You can pay your employees more, you can pay yourself more, you can generate more revenue, more profit and everything is going to be better and more fun.
Just trust me, race to the top, stop racing to the bottom. Just upwards and onwards from here.
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