The moral to this story is to NOT attempt to compete on price. If that’s your only competitive advantage, then you don’t have a competitive advantage.

Now to the story about how I helped destroy my neighbor’s business. Several times a week, a bunch of friends and I would decide where to go for dinner. One local restaurant was trying to attract business by offering a weekly special: Buck-a-Burger night. Heck of a deal.

The problem was that the food was so-so, the service was so-so, and the atmosphere was so-so. The only thing we liked about the place was the price of the burgers. In other words, we only went there on Buck-a-Burger night … and only because of the super low price. When the special ended, so did our visits. It’s called cherry picking, and apparently, a lot of folks felt the same way, because the restaurant closed shortly thereafter.

Yes, they were attracting us, but not as loyal customers. They had a clever idea, but they had nothing to back it up. They competed on price and only on price.

Another place — actually, something of a local legend for decades — featured Cheap-Chicken-Night, serving up all-you-can-eat chicken, family style, for $5.95. This was a fun place to visit, with roadhouse atmosphere, friendly service, great food, tall drinks … and great service. I suspect they made their money on cocktails.

They did fine for years. Unfortunately, as the economy began to tank, their already slim margins slipped into the red, and they also closed this year. Did the Cheap Chicken do them in? Probably not, but it sure didn’t help, especially because most of their customers would have gladly paid perhaps 30 percent more without blinking an eye.

The problem: Competing on price alone … or price and very little else. When I was a young pup just starting out in business, I peddled my services at bargain basement prices. The idea was to get that foot in the door. Once I’d proven myself, I began to increase my rates. My low initial rates were a factor, but my competitive advantage was I could provide my clients with the best ideas and content. When I raised my prices, I never heard a complaint.

So, how should you compete? Start by figuring out why customers come to you. Is it your location on the main highway? Your staff with an average of 10 years experience? That you ship all orders within 24 hours? That you have 1,435 brand choices?

Identify and exploit your competitive advantage. And that has nothing to do with those trite and overused phrases you hear every day. Your competitive advantage is a quantifiable reason customers buy from you. It goes beyond “good customer service” (everyone has or claims to have that), a large selection (how do we define that?) or “great prices” (just how great?).

It’s also not about what you think is a competitive advantage. I worked with a client recently, an exam preparation company for financial advisor licensing. We started out assuming that their status as the oldest supplier of their kind and being family-owned were big advantages.  Well, it turned out that their customers didn’t care about any of that. We discovered that their No. 1 competitive advantage was that their students had a pass ratio between 15 percent and 20 percent higher than the national average. Once we had that figured out, the marketing and promotion campaigns went out like a rifle shot … and brought home a significant increase in business.

The bottom line: Don’t compete on price. Instead, find out what are (or could be) your top competitive advantages. Refine them, identify them, promote them … and watch your business grow.

By John Ingrisano

John Ingrisano is a small business owner and the author of The Back to Basics Book of Selling: A Guide to A Successful Sales Career. Contact John at john@ TheFreestyleEntrepreneur.com.