Hey my small business owner friends! I’m here today to share a piece of wisdom with you after years of working with small businesses. Stop competing on price! This is not a game a small business can win. Whether you are offering a product or a service, you will never be able to access the resources or provide the kind of pressure that a giant corporation can in order to keep your prices down.
As a matter of fact, I would argue that you specifically do NOT want to promote yourself as the lowest price anything. This is true for those of you selling products – focus on your story, why you are unique, what makes you stand out from similar products.
But it is most especially true for those of you offering a service. Repeat after me: “A service is not a commodity”. Say it again like you mean it! A service is not a commodity!
What is a commodity?
The simplest definition of a commodity is a product that is identical regardless of where you buy it or who is selling it. There is a whole commodities market where people buy, sell and trade commodities. Think about a barrel of oil or a bushel of wheat or corn. The price is the price, regardless of who is selling it and where it’s coming from.
Think of yourself as a consumer – are there products that you consider a commodity? Meaning that you select the lowest price option regardless of any other considerations? Maybe it’s a gallon of milk. Or salt. Or chicken broth. Maybe it’s a t-shirt or some item of clothing. Envelopes. You get my drift. Do I care what brand my printer paper is? Even though my printer ‘recommends’ their ‘premium’ paper, I am perfectly happy to buy the cheapest printer paper that actually works with my printer.
Products – Don’t be the cheapest printer paper
The only way to win the commodity game is to be the lowest price offering – which means that you ideally then sell the highest volume. Your profit margins are low – you make money based on selling lots and lots of printer paper, or chicken broth or milk. And you increase your profit margin by decreasing your costs, not by increasing your price.
This is not a winning game unless you are the market leader, like Walmart. Walmart CAN pressure its suppliers to deliver lower prices. It CAN tell them that they can’t raise prices just because the tariffs increased their cost of raw materials.
You don’t want to do business like that, do you?
Services – You are not a commodity!
Okay let’s get back to my main focus – service-based businesses. I know that many of you compete for business with an RFP process, putting a bid together and knowing that the work will go to the company with the lowest bid. And I know that none of you like that process.
Frankly, I don’t think it should be the way business decisions get made. If your only concern is price, you may end up with someone who ultimately can’t deliver the service – or can’t deliver it as expected and when it’s due.
Just because you can cut grass, or clean a house, or design a bridge, doesn’t mean that anyone can do what you do the way that you do it. Would you expect the same level of service from the teenager next door who offers to cut your grass for $10 as you would from a professional lawn service with a team of uniformed employees and commercial equipment? No, because a service is not a commodity. There is NO apples to apples comparison.
My husband experienced this in the past with his work as an electrical engineer designing computer chips. He and his team charged a high rate for their services. They got some push back as companies started employing teams of engineers from India to do similar work. “Why should we pay you $250 an hour when these engineers in Pune can do the same thing for $75 an hour?”
But here’s the question – can they do the “same thing” – deliver the same quality, the same innovations, and the same delivery date? Turns out, not so much. It is not apples to apples. In some cases, maybe the engineers from India are the perfect fit. And in other cases, you might need my husband’s team of U.S. based engineers, who just approach things differently.
Why You Are NOT a Commodity
These examples should give you a good idea of why a service can’t compete solely on price.
So what are the characteristics of a service-based business that make it impossible to commoditize? Let me break it down:
- Unique Delivery Capabilities: Every service provider brings a distinct combination of training, education, and developed skillsets to the table. No two providers—even with identical credentials—will approach a challenge the same way. What are your unique delivery capabilities? What are you doing that is different from the others in your field?
- The Intangible Difference-Makers: The most valuable aspects of service work often come from qualities that can’t be measured on a rate card: ingenuity, innovation, problem-solving approach, and cultural alignment. What does your customer value and how can you highlight those intangibles?
- Relationship Dynamics: Services involve human relationships. The communication style, responsiveness, and personal chemistry between provider and client create value that transcends hourly rates. How can you make sure that customers want to continue to do business with you?
It’s Value not Price that Matters
So how do you stand out from the other service-based companies that you are competing from?
When a potential client focuses exclusively on price, they’re missing the more important question: What value am I actually receiving?
A lower hourly rate might seem attractive until you realize it takes twice as long to reach a solution. Or worse, the solution itself is inferior, leading to costly revisions or missed opportunities.
So how can you point out those additional capabilities to shift the conversation away from price?
- Focus on Your Unique Approach: Can you clearly explain what makes your process different and better than competitors’?
- Demonstrate Problem-Solving Value: Share case studies that showcase how your specific approach solved problems that a commodity service couldn’t.
- Quantify Long-Term ROI: Help clients understand that paying more upfront often leads to greater returns over time – or a more reliable completion of the project.
- Highlight Risk Reduction: Premium services typically come with reduced risk—another value factor that rarely shows up in price comparisons.
The B2B Reality Check
Yes, price will always be a component of decision-making for B2B customers. Budgets exist for a reason. But successful business relationships are built on value delivery, not lowest-bid auctions.
The most successful service companies I’ve worked with don’t win by being the cheapest option—they win by being the obvious best choice despite not being the cheapest.
In today’s global economy, there will always be someone willing to offer a service at a lower price point. Competing in that race to the bottom is a losing strategy for established businesses with genuine expertise.
Instead, focus on making price a secondary consideration to the unique value you deliver. When you succeed at that, you transform from a commodity provider into a true partner—and that’s something clients will gladly pay a premium to secure.
Not sure how to stand out or move the emphasis away from price? Hop on a quick call with me and we can discuss!
