When Your Competition Delivers More For Less
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When Your Competition Delivers More For Less

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When Your Competition Delivers More For Less Presentation Transcript

  • 1. When Your Competition Delivers More For Less Srini Kumar MBA 260G Marketing Strategy
  • 2. Low Prices + High Quality
    • New entrants all manage this combination which destroys margins
    • Old-school players need to change
    • Archetypal across many industries
    • These are known as “VALUE PLAYERS”
    • Wal-Mart, Dell, Southwest Airlines
  • 3. The Status Quo Is Scared
    • Incumbents face cost disadvantages
    • Incumbents do not have superiority
    • Began with the Japanese Invasion
      • Automobiles and Consumer Electronics
      • Initially inferior quality but got better
    • The competition is not just on PRICE
    • Service, Quality, Convenience
    • Compatibility, Design, Distribution
  • 4. VALUE PLAYERS WANT TO SEIZE YOUR MARKET SHARE
    • Keep costs in line
    • Find ways to differentiate yourself
      • Identify opportunities left open by the competition’s business model
    • Manage prices effectively
      • Wage a transaction-by-transaction perception battle with competitors
      • Win over customers predisposed to pay more; maximize the margins made
  • 5. “GOOD ENOUGH”
    • Value players combine rock-bottom prices with “good enough” quality
    • You have to do without frills and reserved seating on Southwest
    • Once you make money attracting the competitors’ customers you can drop your prices even more
    • With low prices, value players attract customers who live farther away
  • 6. Higher Sales Productivity
    • Improve your Value Proposition
    • Improve your Operating Model
      • Low Costs mean Lower Prices + More Employees
      • Supply Chain and Marketing Productivity
    • Communicate your Value Proposition
    • Build New Channels
    • Thrill and Empower Your Customers
      • Customer Loyalty & Profitability; Evangelists
    • Create a Systematic Sales Process
    • Access New Sources Of Demand
    • Steal Sales From Your Competition
  • 7. The Virtuous Value Cycle
    • More Customers
      • Drop your prices to bring more on board
      • Undercut competition and advertise this
    • More Profitability
      • Preserve margins and cut costs
    • Better Economics
      • Greater volume = economies of scale
      • Mass marketing becomes viable
  • 8. Obstacles to Value Players
    • Essential Resources Are Locked Up
      • You can only build where there’s still land
      • Airlines need gates – a limited resource
      • Inexpensive labor; prime retail locations
    • Information
      • Harder to communicate value proposition
      • The trend: falling information barriers
    • Regulations
      • Laws constrain who can enter a market
    • Customers
      • May not care for the value experience
      • The trend: greater desire for value
  • 9. The New Competition
    • Consumer attitudes about price and quality are permanently changed.
    • Companies differentiate frantically.
    • Many new products and services are invented; new business models emerge.
    • Companies become good at execution.
      • Managing price perception
      • Reducing Costs
    • RAPID EXPERIMENTATION/INNOVATION
  • 10. The Value Players’ Credo
    • Choose frequently-purchased item
    • Price aggressively
    • Let the customer compare easily
    • Have a systematically low-cost structure
    • Accept low margins to boost market share
    • Charge more for higher-end offerings to make up for lost margins on low end
    • Focused advertising showcasing offers
    • Simple, prominent signage/slogans
    • Sustainable promotional initiatives
      • Don’t undermine future sales for short-term customers