After 50 years in business and countless board meetings, I’ve watched too many companies hand over their competitive edge the moment a competitor undercuts their price.
Here’s the brutal truth: If your only defense against competition is lowering prices, you don’t have a strategy—you have a problem.
The Mystery-Margin Connection
The most successful companies I’ve invested in understand a fundamental principle: “Where there’s mystery, there’s margin.”
Your competitors can copy your features. They can mimic your marketing. They can even poach your talent.
But they can’t replicate the unique value you create when customers don’t fully understand how you deliver results that seem impossible to achieve anywhere else.
Three Strategic Moves That Actually Work:
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1. **Create Information Asymmetry**
Stop explaining everything. The more your customers understand your “secret sauce,” the more commoditized you become. Apple doesn’t publish their chip architecture. Netflix doesn’t reveal their recommendation algorithms. Mystery preserves margin.
2. **Own the Problem, Not the Solution**
Competitors focus on features. Winners focus on outcomes. When you own the customer’s core problem so completely that switching feels risky, price becomes secondary to peace of mind.
3. **Build Switching Costs Into Everything**
Every interaction should make leaving more painful. Data integration, workflow dependencies, relationship depth—these create moats that pricing battles can’t breach.
The Real Question
Instead of asking “How do we compete on price?” ask “How do we make price irrelevant?”
The companies thriving in today’s market aren’t the cheapest—they’re the ones their customers can’t imagine living without.
What’s your strategy for making your competition’s pricing irrelevant?
*Drawing from insights shared at Berkonomics and five decades of backing entrepreneurs who understood that true competitive advantage can’t be purchased at a discount.* Image created using DALL-E3.
