If a competitor enters your market with a similar product priced at a fraction of what you currently charge it is equivalent to a nightmare. You need a strategy to beat these low cost rivals.
On one hand you can lower your prices below the competitors, and buyers will be at your door. On the other hand, this will land you in a price war, and there are no winners in a price war — only survivors;chances are you may not have much of a business left when the battle is over.
it is possible to beat a lower-priced competitor without foregoing your profits. The bad news is that you'll need to make major operational changes, and rethink how you communicate with customers. The changes are better than the alternatives. So it embarks on one of the biggest strategy challenges.
Select a Value Strategy.
Goal: Lay the framework to reposition the product.
When customers prefer the lower priced of two items, it's usually because they believe the cheaper item is a better value. To compete, you need to get the customer to value your product more than the competition's,regardless of the price.
According to Michael Treacy, there are four market strategies that accomplish this:
Lower your prices. Yes, this is an option but the challenge is to do it without destroying your profits.margins. The danger here is it ends up with a price war.
Build a uniquely superior product.
Customers are willing to pay more if they're convinced your product is better than the competitors. It can be "rational", "emotional", or a combination of both.
Create a hassle-free experience.
if your product is easier to buy and use then the customers will automatically pay more. happy customers pay more for the convenience even though the price is higher than competitors product..
Take ownership of the customer's results.
If you take responsibility for ensuring that the product generates the results the customer seeks the customers will pay more.
Big Idea
Where Do You Fit In..
Think of product value as a grid. The left axis defines what you sell: Does your firm offer stand-alone products, or do you specialize in offering an ongoing set of services? The top axis is about your core value proposition: Does your offering compete largely on the basis of how much it costs, or does it offer features that make it unique? The more sophisticated your product gets, the more you can charge for it relative to the competition. Similarly, the more value your services provide, the more you can charge for them.
Costs
Benefits
Products: "What we sell"
Price
Uniquely better product
Service:"How we do business"
Hassle-free purchase experience
Owning customer results
Source: GEN3 Partners, 2007
Reposition, Readjust, and Reallocate
Goal: Make the internal changes necessary to support your strategy.
Lower prices by making changes in manufacturing and distribution.
To beat low-price competitors along with remaining profitable,needs you to squeeze every last drop of inefficiency and cost from your manufacturing and distribution system.
Building a uniquely better product
Determining what features or design will prompt customers to see your product as being uniquely superior to the competition will help in better designing and engeneering of products.
Creating a hassle-free experience
Changing sales and marketing. Check out why it's difficult to buy and use your competitor's product, and then make it easy to buy and use yours.
Checklist
Self-Assessment: Your Firm's Core Competence
rate the following aspects of your company's operations:
5=Best in the industry
4=Better than average
3=We're OK
2=We stink at this
1=Say what?
Controlling our supply chain.
- Setting up channel partnerships.
- Designing great products.
- Basic research and development.
- Creating marketing materials.
- Building customer relationships.
- Keeping existing customers happy.
- Getting customers to refer prospects.
Total each pair. The highest numbered pair indicates your core competency.
Match that with the strategy you should embrace, below.
First pair is highest: lower your price strategy.
Second pair is highest: uniquely better product strategy.
Third pair is highest: hassle-free experience strategy.
Fourth pair is highest: ownership of results strategy.
Warning: if no pair adds up to more than 6, your company may not be a viable competitor.
Promote the New You
Goal: Communicate new value strategy to potential customers.
Once you've implemented all the operational changes required to reposition your product in the marketplace, tell the world why your firm offers superior value. That means adopting a communications strategy that matches your market strategy, as follows:
If you offer lower prices, mimic the competition's go-to-market strategy. Ensure that whenever a customer sees a competitor's product, your product is right next to it — at a lower price.
If you build a uniquely better product, target your advertising. Reach customer groups that are most likely to believe your product is superior by selecting venues that the competition neglects.
If you create a hassle-free experience, generate positive word of mouth. Make it easy for your customers to sell for you. Consider "tell a friend" coupons or offer referral fees.
Prepare a Plan B
Goal: Secure long-term competitive advantage with a secondary market strategy.
a new pricing strategy and a new way to market it to customers. Just as you are responding to your competitor's pricing moves, they will do the same in response to you. If you make things easy for customers, your rival could make things even easier. To prevent this, it's important to simultaneously execute a secondary market strategy that supports the first. Here's how it's done:
The challenge in executing a secondary strategy is that the four basic market strategies are, to a extent are mutually exclusive. Better products typically cost more to make.
Nevertheless, having a secondary strategy in place — even if you can't make it fully effective — is a great way to keep competitors at bay because it makes it far more difficult for your rivals to beat you in your areas.
No comments:
Post a Comment