Being Cheaper is Not a Competitive Advantage

Consult Our Experts

As someone who attends dozens of startup pitches a month, “our product is cheaper” is a phrase I hear all too often. I see it time and time again. A company believes it can disrupt the industry by offering a similar product at a lower price, but the end result is that the established companies simply lower their prices until the startup is forced to quit.

Competing on price is a very dangerous game and unless your company has truly managed to be able to find a way to lower costs that is not through just operating at a lower margin (use margin calculator for the accurate results), your cheaper prices are not a competitive advantage.Instead, a competitive advantage that is not easily replicated provides a far more stable way to push your company ahead of competitors. You can take a look at some of the technological advantages that we built for our partner companies here.

If you want to compete on price, there are two key questions to ask yourself.


As much as we all love money, cost is often not high on the list for many industries. One of the most common factors here is understanding the difference between the customer who actually chooses which product to purchase and the customer who pays for the product themselves. Let’s take human resource management software for example. When shopping around for HR software, the primary decision maker is usually the head of the HR department. While they usually have a budget, the far more important factor that they consider is simply how can the software make their jobs easier.

Click here to see where we used our development team to create a technological competitive advantage for Omnidian.


“Significant” is very hard to quantify without a large amount of data to do some price sensitivity analysis, but most businesses can get a good sense of price sensitivity with some basic business analysis. In general, the more specific your product is, the less price sensitive your customer will be. A product that is highly tailored and niche such as a custom built bolt for the US Air Force will be far more expensive than a similar bolt from Home Depot.

Another key factor that is often forgotten when considering price sensitivity is switching costs. If we take enterprise software for example, the price difference would have to be very significant before a company is willing to switch over to a competitor. All of the switching costs such as retraining employees, transitioning over to a new software system, etc can easily negate your lower prices and in many cases, switching costs can make it actually more expensive to change over to a “cheaper” enterprise software system.

New entrepreneurs and startups tend to gravitate towards being cheaper as a differentiator. After all, it is one of the few ways where you can have a numerical value represent just how different your product is compared to other companies. That said, I continue to advise startups over and over that while other competitive advantages are less quantifiable, they will serve your company far better than going the route of simply being cheaper.

Want to build yourself a technology based competitive advantage? Contact us here.


Assim Gupta

Assim Gupta linkedin-icon-squre


Assim Gupta is the CEO and Founder of Closeloop, a cutting-edge software development firm that brings bold ideas to life. Assim is a strategic thinker who always asks “WHY are we doing this?” before rolling up his sleeves and digging in. He is data-driven and highly analytical, yet his passion is working with teams to build unexpected, creative solutions that catapult companies forward.

Start the Conversation

We collaborate with companies worldwide to design custom IT solutions, offer cutting-edge technical consultation, and seamlessly integrate business-changing systems.

Get in Touch

Unlock the power of AI and Automation for your business with our no-cost workshop.

Join our team of experts to explore the transformative potential of intelligent automation. From understanding the latest trends to designing tailored solutions, our workshop provides personalized consultations, empowering you to drive growth and efficiency.

Go to Workshop Details

Explore Our Latest Articles

Stay abreast of what’s trending in the world of technology with our well-researched and curated articles

View More Insights
Read Blog

The Path to Efficiency: Leveraging AI and BPA for Business Success

Businesses are as good as the strategies and processes they implement to keep up with everyday...

Read Blog
ai and bpa for business
Read Blog

How to Overcome Common Challenges in Legacy App Modernization

In an era where every nanosecond shapes success, businesses are on the brink of a...

Read Blog
challenges in legacy app modernization
Read Blog

The Role of a Tech Partner in Achieving Business Goals

Imagine a day without technology! Hard to believe, isn’t it? Every decision you take, every...

Read Blog
role of a tech partner
Read Blog

AI-Powered Resilience: The Transformative Power of AI in Business Continuity

"If trouble comes when you least expect it, then maybe the thing to do is to always...

Read Blog
power of ai in business
Read Blog

The Future of SaaS: Key Trends Shaping SaaS in 2024 & Beyond

Leveraging a platform that constantly innovates through seamless on-air updates can take away a...

Read Blog
future of saas trends 2024