Why you should compete on value, not on price



According to the definition, heuristics are simple and effective rules which customers use in order to form judgments and simplify the buying process. Such aspects such as social identity, sunk costs, price anchoring, scarcity, earned money vs found money have a big impact on how people will choose what to spend their money on. Price is one of the most influential factors when it comes to buying so what should you do when another competitor enters the market? Lower the price, increase the price or stay the same? It all depends on the value your services are perceived. After all, we all know


“A brand is a gut feeling about a product or service.

It’s not what you say it is. It’s what THEY say it is.”

-Marty Neumeier, author of The Brand Gap



How do customers perceive you?

What is your position in the market? Are you considered “expensive?” Or are you considered “cheap?” Do your clients think you offer  “great value for the money?” Or do would-be customers consider you as having “superior craftsmanship and quality that you can’t get anywhere else?”

Do they “love the story?” Or do they just not care?

A very simplified method of analysis is to use a perceptual map: a visual representation of consumer perception of a brand and its competitors using attributes that are important to customers.

A few examples of perceptual maps might  look like this according to the price and quality attributes




Decide where you want to be

After you positioned your brand on the perceptual map, you should have a much more clear vision of where you are.The real question now is how YOU want to be perceived. Do you want to be perceived as a high-quality brand with high prices? Do you want to be able to up your price or lower it? Repositioning takes a long time and might sometimes fail. If your brand core values don’t relate to the message you’re sending out, people will get confused about your image. When Marmite wanted to increase prices, Tesco stood by its values and refused to do so saying  “We always put our customers first and we are pleased this has been resolved to our satisfaction.”  At the same time Unilever increased the prices immediately and their reputation got a hit after Tesco’s decision. Whose image is more trustful?

Now take a look at your competitors who charge higher prices and ask yourself :

  • How do we become better than them?

  • What makes us different?

  • What is the vision for our customers?

After answering these questions you should have a clear image of where you are and where to go. This is a complex process, so take your time.



Be quality-sensitive, not price-sensitive

In order to not compete on price, you must offer value to your customers and you also communicate your value to them.  You must also know who your clients are and how you serve them. What problems is your brand solving for your clients? Are your clients getting what you promised? If there are gaps in your promises then fix them. At Moxels we promise our clients cheaper, more flexible and fully customizable imagery in contrast to traditional photography. And we make sure that we deliver and that we bring value to our customers.

These are the types of questions you need to start asking because in order to be able to charge more you need to be able to solve a bigger problem rather than just saving someone some pounds. One way to do that is by finding the value it brings using the Maslow’s hierarchy of needs. The higher you are on the scale, the more valuable you are to your customers. Once your product is perceived to have more value in the eyes of your customers you can charge more for your services and you don’t have to compete on prices as before.



Advantages of higher prices

Now that we have mentioned the need to be quality-sensitive, not price-sensitive what would be the advantages of higher prices? Keep in mind that the perceived value you offer needs to be high in order to have purchase demand from your customers. You should not increase the prices while offering the same value.

  • You would have an identifiable differentiator

  • In every industry there is a premium service for anything, just look at the most expensive option. Since we mentioned the heuristics, customers associate higher prices with high quality. Take a look at Bang & Olufsen, a high-end company which sells TVs,  sound systems and audio speakers. Everything from prices, the design of the website and products and lack of sales promotions show high quality. They are clearly one of the top leaders in their industry.

  • Increased margins

  • The margins for high-end products are higher than the ones for average products. The profit percentage is a larger number because the product price is higher, to begin with.


To wrap it all up, success doesn’t arise from competing on price alone. You need to analyze your brand, the value others are offering and how you could offer a better alternative. How could you solve your clients’ problems in a more efficient way?

After following through these tips you should have a clearer vision of what you should improve and the direction your company should go in order to establish itself as a high-end brand.

Cheap prices alone will not be a very effective strategy long term, but building a reputable brand will.

And the most effective way to build a reputable brand is through strong visual imagery. We will detail how that is being done properly, in our next article.

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