Should You Compete on Price?

Billtrust competes in a number of different markets with dozens of different competitors.  We like to think that we've built a feature rich solution for a reasonable price that allow companies to reduce their total billing costs over time as we help them migrate more of their customers to electronic billing and payment.

In every business you need to decide on your market positioning for your goods or services. If you were to open a "brain surgery" business, you would likely market yourself based on how experienced you are in the delicate art of brain surgery.  If you wanted to open a business selling garbage cans, my guess is you would probably go to market with the lowest cost garbage cans in town since a garbage can is a garbage can.  Being the cheapest brain surgeon in town would probably not get you too much business.

The basic rule of thumb is that the closer your product is to a commodity, i.e. difficult to differentiate from others, the more it becomes a matter of who can do it cheapest.

In this Becoming Essential blog post, Ted discusses why competing on just price is dangerous.  He separates businesses into either commodity or premier business and does a great job of describing the perils of being the cheapest vendor.

We have some competitors that have massive print and mail centers throughout the country with little or no electronic billing capabilities.  Understandably, they compete effectively by stressing how the world is still 90% paper and stressing all the wonderful paper billing features they have.

Some of our competitors have a great roster of Utility companies that they do business with and therefore stress what an expert they are in the field of Utility billing.

Each of these are good strategies, you go with what you've got.

However, we've got one competitor in one industry that has chosen to compete solely on price.  They'll send out your bills cheaper than anybody.  In fact, they'll even lose money on every bill for a period of time just to win your business. If I'm a buyer, this sounds attractive since I want to save as much money as possible and billing is billing, right?

Fortunately for us, billing isn't a commodity which we can emphasize with a very simple exercise:

Please cross off which of the following things is not important to you:

1. A disaster recovery strategy so that my bills will always be sent out in a timely fashion

2. Getting bills to my customers fast so that they can pay me promptly

3. Making sure my bills get sent out accurately each time

4. Giving my customers the option to pay me any way they choose

5. Making sure my billing vendor isn't using my private customer data to sell other services

We have about two dozen of these points that we make when we're up against this competitor.  So far so good. 

We're certainly cognizant of the fact that people want to maximize their cost savings.  But at the end of the day, if you're competing solely on price, you've got little chance of being successful in a non-commodity business.

Comments

[TheoldestLane]

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