When Your Competition Delivers More For Less Srini Kumar MBA 260G Marketing Strategy
Low Prices + High Quality <ul><li>New entrants all manage this combination which destroys margins </li></ul><ul><li>Old-sc...
The Status Quo Is Scared <ul><li>Incumbents face cost disadvantages </li></ul><ul><li>Incumbents do not have superiority <...
VALUE PLAYERS WANT TO SEIZE YOUR MARKET SHARE <ul><li>Keep costs in line </li></ul><ul><li>Find ways to differentiate your...
“GOOD ENOUGH” <ul><li>Value players combine rock-bottom prices with “good enough” quality </li></ul><ul><li>You have to do...
Higher Sales Productivity <ul><li>Improve your Value Proposition </li></ul><ul><li>Improve your Operating Model </li></ul>...
The Virtuous Value Cycle <ul><li>More Customers </li></ul><ul><ul><li>Drop your prices to bring more on board </li></ul></...
Obstacles to Value Players <ul><li>Essential Resources Are Locked Up </li></ul><ul><ul><li>You can only build where there’...
The New Competition <ul><li>Consumer attitudes about price and quality are permanently changed. </li></ul><ul><li>Companie...
The Value Players’ Credo <ul><li>Choose frequently-purchased item </li></ul><ul><li>Price aggressively </li></ul><ul><li>L...
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When Your Competition Delivers More For Less

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When Your Competition Delivers More For Less

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

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