When competing on price becomes a problem

When price is a deliberate strategy and when it turns into a sign of vulnerability.

Introduction - price is not the problem, lack of choice is.

Price is one of the most sensitive topics in business because it directly affects margins, competitiveness and long-term viability. Whenever markets tighten, new competitors emerge or sales slow down, price becomes the fastest lever to pull. It is immediate, visible and, in the short term, often effective.

But price itself is not the problem. There are sectors and business models where competing on price is not only legitimate but essential. Companies built on scale, operational efficiency or strict cost control can, and should, go to market with price as their core advantage. In those cases, price is not a defensive move; it is the strategy.

The issue arises when price stops being a conscious choice and becomes a reaction. When companies lower prices not because that is their natural positioning, but because they no longer have clear, credible alternatives in the market.

The risk is not competing on price. The risk is relying on it without having chosen it.

1 - When competing on price makes sense

It is important to be clear: competing on price can be a solid and sustainable strategy when it is aligned with the business model. Organisations that operate with low margins and high volume, supported by efficient processes, optimised supply chains and controlled complexity, can sustain this approach over time.

In these cases, price never stands alone. It is supported by an operating model built around:

• efficiency and scale,

• disciplined cost control,

• a clear and limited offer,

• well-managed market expectations,

• and low dependence on customisation or perceived exclusivity.

Here, lowering prices does not destroy value, because value was never anchored in differentiation, complexity or premium perception. It was anchored in accessibility.

2 - When competing on price does not make sense, but happens anyway

The most common issue among SMEs is not choosing to compete on price, but ending up competing on price without ever deciding to. Many companies start by selling on quality, proximity, expertise or service. Over time, as competition increases and markets become noisier, these differences stop being clearly communicated.

When that happens, alternatives begin to look similar in the eyes of the client. And when everything looks similar, price becomes the easiest comparison point. Not because customers suddenly care more about price, but because the company stopped making its differentiation visible.

In this scenario, lowering prices does not solve the underlying issue. It simply hides it temporarily.

Price becomes central when differentiation is no longer understood.

 3 - The most dangerous scenario: when price marks the beginning of decline.

There is a third, more silent and more dangerous situation. One in which companies repeatedly lower prices to remain competitive, without changing their operating model, gaining scale or reinforcing differentiation.

Here, price is no longer a strategy, it is survival. Margins shrink while market expectations remain the same or increase. Over time, the company loses the financial room needed to invest, improve and evolve.

This is a critical point for many SMEs in our market. Businesses with good products, solid services and strong customer relationships enter a cycle of constant discounting, often believing it to be temporary. It rarely is. Price trains the market. Negotiation becomes standard. Every sale turns into a discussion.

When this happens:

• the initial price loses credibility,

• customers learn to wait for discounts,

• margins stop funding evolution,

• and the company works more to earn less.

In many cases, this is the beginning of the end, not immediate, but structural.

4 - The internal impact of constant price pressure

Sustained price pressure does not only affect financial results. It reshapes internal decision-making. Lower margins reduce the ability to hire better talent, invest in technology, improve processes or strengthen customer experience.

Gradually, the organisation shifts into defensive mode. Investments are postponed, improvements are delayed and decisions focus on short-term survival. The business continues to operate, but its capacity to adapt erodes.

Companies do not fail because they sell cheaply. They fail because they lose the ability to reinvest.

5 - When the market “won’t pay more” and when value is simply not understood.

There are markets that are genuinely price-sensitive. But in many cases, the assumption that “the market won’t pay” is premature. Often, the market does not pay more because it does not clearly understand why it should.

Value that is not explained, demonstrated and reinforced over time effectively disappears from the client’s perspective. This is not resolved at proposal stage. Perceived value is built earlier, through problem framing, the questions asked, the criteria introduced and the consistency between what is promised and what is delivered.

When this work is missing, price inevitably becomes the focal point. Not because it matters most, but because it is the only visible reference.

6 - Price as a consequence of positioning, not a substitute for it.

In companies that are able to sustain healthy margins over time, price is rarely the focal point at the final stage of the decision. This is not because customers suddenly stop caring about price, but because the decision has already been framed around broader and more relevant criteria.

Throughout the process, these companies help clients understand the impact of the decision, the risks of inaction, the continuity of the relationship, the suitability of the solution to their specific context and the practical consequences of choosing one option over another. By the time price is discussed, it sits within a much wider decision framework.

When this groundwork is done properly, clients are no longer comparing numbers alone. They are comparing scenarios, levels of risk, operational impact and long-term confidence. Price still matters, but it no longer stands on its own.

In this context, price is not used to compensate for a lack of differentiation. It becomes the natural outcome of a clear positioning and a well-understood value proposition. It does not replace value, it reflects it.

Conclusion - the issue is not price, but the lack of strategic alternatives

Competing on price can be a legitimate choice, but it is not a choice available to every company. It requires scale, operational efficiency, strict cost control and a business model designed to operate with reduced margins. When these conditions exist, price can be a sustainable competitive advantage. When they do not, price quickly becomes a vulnerability.

The problem arises when a company enters a price-driven logic without having those foundations in place. In that situation, lowering prices is not a strategy, it is a reaction. And reacting to the market through price is almost always a sign that other strategic alternatives are no longer available or clearly defined.

The real risk is not selling cheaper. It is reducing margins without creating the conditions to evolve the product, improve the customer experience, invest in people or strengthen differentiation over time. This approach may protect short-term sales, but it undermines the company’s ability to adapt in the long run.

Ultimately, the key question is not whether a company should be cheaper or more expensive. It is whether it has a clear, coherent and sustainable strategy that allows it to be chosen for reasons beyond price or whether price has become the only lever left in an increasingly competitive market.