BNET Crash Course

How to Beat a Lower-Priced Competitor

by Geoffrey James

Tags: Competitor, Competition, Product, Customer, Management, Geoffrey James, price, costing, competitive strategy, Crash Course

It’s every company’s nightmare: a competitor enters your market with a similar product priced at a fraction of what you currently charge. You need a strategy for beating the low-ballers. So what’s the best way to proceed? On the one hand, all you need to do is drop your prices below the competition, and buyers will beat a path to your door. On the other hand, this approach will land you in a price war, and there are no winners in a price war — only survivors. Even if you manage to run your competitor out of business, chances are you may not have much of a business left when the battle is over. Luckily, it is possible to beat a lower-priced competitor without crippling your profits. That’s the good news. The bad news is that you’ll need to make major operational changes, and you’ll need to rethink how you communicate with customers. The changes required may not be for the faint of heart, but they’re better than the alternatives. So gird your loins, corporate warriors; you’re about to embark on one of the biggest strategy challenges you’ll ever face.

Things you will need:

  • Plan to increase your annual sales and general administration (SGA) expenses for the current year by approximately 25 to 50 percent.
  • Six months at bare minimum: three to make operational changes and three to inform customers of the change.
  • A Viable Product: The overall quality and functionality of your product or service must be in the same general ballpark as that of your competitors.
  • Competitive Cost Analysis: You need to know exactly how your supply chain, manufacturing, and distribution costs stack up against the competition.
  • An Executive Task Force: You are about to undertake a major reorientation, so you’ll need a brain trust of energetic leaders to guide and implement the changes.
  • A Top Advertising Firm: Communicating your new value strategy to customers will probably require more creativity than you’re likely to find in your own marketing group.
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Select a Value Strategy.

Goal: Lay the groundwork for repositioning your 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, coauthor of the classic bestseller The Discipline of Market Leaders, there are four market strategies that accomplish this:

  1. Lower your prices. Yes, this is an option. The challenge is to do it without destroying your own profit margins. (We'll explain how to do that in the next step.) The big danger here is that you'll end up with a price war, so you must ensure that you have what it takes to be the last firm standing. Example: Dell underpriced PCs during the 1990s in order to grow market share.
  2. Build a uniquely superior product. Customers will pay more if they're convinced your product is demonstrably better than the competition. This superiority can be "rational" (like a feature or function nobody else has), "emotional" (like a reputation for being "cool"), or a combination of both. Example: Car buyers pay more for Volvos because they're seen as safer than other cars.
  3. Create a hassle-free experience. Customers will pay extra if your product is easier to buy and use than the competitor's. Example: Many shoppers happily pay more for the convenience of bagged lettuce, even though it is significantly more expensive than head lettuce.
  4. Take ownership of the customer's results. Customers will pay extra if, in addition to providing the product, you take responsibility for ensuring that it generates the results the customer seeks. Example: GE's Magnetic Resonance Imaging (MRI) machines come with consulting programs, operating training, and a patient-preparation program — a package that ensures that the machines will meet the hospital's performance expectations.

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.

CostsBenefits
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.

  1. Lowering your prices = Changing manufacturing and distribution. To beat low-price competitors at their own game while also remaining profitable, you need to squeeze every last drop of inefficiency and cost from your manufacturing and distribution system. Example: If your competitor has outsourced its manufacturing to China, consider outsourcing your manufacturing to Vietnam, where costs are even lower.
  2. Building a uniquely better product = Changing design and engineering. Determine through market research what features or design will prompt customers to see your product as being unequivocally superior to the competition. Then get engineering to build it. Example: If you're launching a line of "designer" handbags, find out what fabrics and leather provide a look and feel that potential buyers view as "upscale."
  3. Creating a hassle-free experience = Changing sales and marketing. Figure out why it’s difficult to buy and use your competitor's product, and then make it easy to buy and use yours. Example: Pioneer recently offered giant console TVs for sale at Home Depot, because many customers often already had a truck in the parking lot that they could use to haul the bulky item home.
  4. Taking ownership of the customer’s results = Changing customer support. Build a deep bench of experts who really understand your customers’ businesses. Example: Under Lou Gerstner, IBM hired and retrained thousands of consultants, transforming the company from a mainframe computer vendor into a computing services vendor.

Checklist

Self-Assessment: Your Firm’s Core Competence

Pretend to be an objective outside observer and 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: embrace a “lower your price” strategy.
  • Second pair is highest: embrace a “uniquely better product” strategy.
  • Third pair is highest: embrace a “hassle-free experience” strategy.
  • Fourth pair is highest: embrace an “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 your new value strategy to potential customers.

Once you’ve implemented all the operational changes required to reposition your product in the marketplace, it’s time to tell the world why your firm offers superior value. That means adopting a communications strategy that matches your market strategy, as follows:

  1. 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. Example: Kinko's searches out local print/copy shops and locates a franchise across the street, offering prices that the local shop can't match and eventually driving them out of business.
  2. 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. Example: Sony's VAIO PC business advertises in lifestyle magazines to reach female buyers, who are more likely to appreciate the VAIO's sleek design.
  3. 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. Example: “Network Marketing” products (like Amway) are typically priced higher than store-bought items, but they are sold by neighbors to neighbors (that’s the word of mouth) and drop-shipped to the buyers (that’s the hassle-free part).
  4. If you take ownership of the customer’s results, create a presence as an industry insider. Get your sales consultants out to conferences, working groups, and industry-association meetings where they can work closely with decision-makers and develop consulting opportunities. Support your consultants with a wealth of case studies and reference materials. Example: The IT consulting firm Accenture promises to take responsibility for the successful implementation of the strategies it develops for clients.

Case Study

How Microsoft Fought Back Linux

Ryan Kubacki, a former Microsoft executive who is now president of Holden International, explains how Microsoft reacted when Linux, the open-source operating system, first came on the market:

“When I was Microsoft’s business marketing officer for the U.S. central region, [CEO Steve] Ballmer drafted me to work on the company’s Linux strategy. When Linux first became big news, there was a perception in the market that because it was free, it was therefore a better deal than Windows. Since this was a direct assault on Microsoft’s business model, we build a team of experienced market research and messaging people, including a guy who had been one of Bill Clinton’s advisors during the Lewinsky scandal.

“The team polled around 6,000 IT customers and discovered that Linux was favored over Windows for a variety of reasons, some of them emotional (like envy over Bill Gates’s wealth) and some rational (like an unpopular licensing scheme). Since there was little we could do about the emotional issues, the team decided to attack the Linux value proposition.

“We told IT buyers, before making a commitment one way or the other, to find out what it actually costs to run a Linux shop as compared to a Windows shop. We provided reams of data suggesting that Linux was more difficult to integrate, more difficult to manage, and more difficult to support — all of which ends up costing more money than would be saved by avoiding a license fee. By emphasizing value rather than price, we were able to blunt the Linux narrative and keep it from becoming an overwhelming threat to Microsoft’s enterprise strategy.”

Prepare a Plan B

Goal: Secure long-term competitive advantage with a secondary market strategy.

You’ve got a new pricing strategy and a new way to market it to customers. That’s great, but do you really have what it takes to pulverize the competition? After all, strategy doesn’t occur in a vacuum. Just as you are responding to your competitor’s pricing moves, they will do the same in response to you. If you’re only better than your competition in one dimension, you run the risk that your competition will focus on that dimension to leapfrog over you. If you’ve got the best product, the competition may figure out how to make a better one. 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:

  1. Go back to the self-assessment in Step 2. Notice which pair of corporate characteristics had the second highest total.
  2. Figure out what you would do to execute a marketing strategy if that pair had been your highest total. (For example, if “taking ownership of results” ranked second, you’d need to beef up your sales and support teams.)
  3. Decide to what extent you can execute that secondary strategy without screwing up your primary strategy.

    Example 1: You’ve got a killer product that people love. Is there a clever way to manufacture it for less, so that your retail price will remain lower than that of the competitor’s crappy imitation?
    Example 2: Your product is the same as everyone else’s, but you can sell it for lots less. Compared to your competitors, is there a way you can get it into customers’ hands more quickly and with less hassle?

The challenge in executing a secondary strategy is that the four basic market strategies are, to a certain extent, mutually exclusive. Better products typically cost more to make. An “ownership of results” strategy often entails throwing resources at each customers’ problems until they are fixed.

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 at your own game.

For Example

The One-Two Punch in Real Life

Product Primary Value Strategy Secondary Value Strategy
Apple PCs Uniquely better product Lower price (Now competitively priced versus mid-range Windows PCs.)
Domino’s Pizza Hassle-free experience Lower price. (Mostly through frequent coupons and specials.)
Kia Automobiles Low price Hassle-free experience (Pioneered long-term service warrantees.)
Marriot Courtyard Low price Uniquely better product (Pioneered idea of Internet connections in every room.)
 
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  • 1

    darealaby

    06/19/07 | Report as spam

    excellent

    This areticle is highly informative and would easily resolve problems pertaining to this.

    •  
  • 2

    Innovation Speaker

    01/31/08 | Report as spam

    Are you good enough?

    The author provides a good summary of some (not all) of the approaches people might take.

    Check out this article to read more on this topic:

    http://www.business-strategy-innovation.com/2006_11_01_new-profits_archive.html

    •  
  • 3

    bmurphy@...

    06/19/07 | Report as spam

    Strategic Defense

    Very interesting article. However, In the arena we operate in we also focused on the aspects within our business interactions with our customers that we thought we could not change. We felt we could look at the ways in which we could lower costs, deliver better service etc but still felt it was not enough. By looking at the way we and our competitors interact and deal with our customers we realised we all basically operate similarly because of, customer expectations, cultural norms and business practices. These we assumed we could not change. By analysing this we found new ways of dealing with customers. They felt as if a new supplier entered the arena. It also introduced us to new markets. I am not saying it will suit all businesses but by looking at the problem from another perspective it may help you achieve greater competitive scope.

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  • 4

    info@...

    06/19/07 | Report as spam

    Thought provoking

    Interesting article! With the increasing trend and impact of globalisation, the first mover advantage benefits seems to be narrowing down with time, as competition is able to catch up fast.
    How long will it be before the competition catches up with our USP?
    However, technological superiority does seperate you from the rest and not all can afford to possess such technology. Thus it boils down to efficient management of supply chain and improving competencies, that become the focus for most operators in fighting the low priced competitors.

    It would be interesting to look at how this works in the service industry, which is driven by overheads and costs.

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  • 5

    drhall

    06/19/07 | Report as spam

    How To ????

    Emotional involvement - Prius is not that great mileage car in reality, however, it does make statement, proves innovation "headings", and creates a environmental "buzz". Those are extremely viable marketing tools - Personal Emotional Attachment to product, aka Apple; Stands OUt in crowd;Purpose Driven Product or
    Purchase Statement; and "Buzz" aka IPHONE, look at the year long Market Softening
    BEFORE introduction (very very clever Buzz builder, aka Ginger/Segway total market involvement Waaaay before actual production.) don hall / bearcreekresearch

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  • 6

    vdimondi

    06/19/07 | Report as spam

    What is authors background

    It would help if we knew who put this article together and their actual business experience.

    •  
  • 7

    jasocher@...

    06/22/07 | Report as spam

    Why does that matter?

    What's the author's background got to do with the price of beans? Good advice is good advice regardless of the source. I seriously hope you're not going through life trying to determine whether advice is helpful or not based on someone's background.

    •  
  • 8

    josephmartins

    11/27/07 | Report as spam

    there's nothing wrong with that

    While one might have the background, experience, or simply the talent to tell good advice from bad, others may not. Right or wrong, many people still value advice based on its origin. This person obviously prefers to know the background of the writer dispensing business advice. There's nothing wrong with that.

    As an aside, the advice is generally sound, but it isn't news. Much of the information is dated and available from numerous online and print resources.

    I do wish fewer people would suggest moving production halfway across the globe just to lower costs. Any amateur CEO can do that. I'd like to see more companies call the US home manufacturing - there is an opportunity here in the States for manufacturing premium/upscale goods and services competitively.

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  • 9

    josephmartins

    11/27/07 | Report as spam

    more disturbing

    What disturbs me most is a recent report, based on a broad survey, that claimed consumers somehow correlate credibility with low pricing.

    Company such as Wal-Mart have created a low-price environment in which far too many consumers tend to associate higher prices with being ripped-off (i.e. charged "too much"). It's a dangerous mindset that pushes premium products further upmarket to an even smaller audience. For many goods and services, average Joes are simply not willing to pay based on value.

    Interestingly, these same consumers tend to overstate their own value and expect to be compensated accordingly.

    That is to say, they are perfectly willing to underpay others to perform tasks or produce goods which they would never consider performing/manufacturing themselves for the same wage. That has to be my single greatest peeve about my fellow countrymen.

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  • 10

    Chimuka

    06/19/07 | Report as spam

    THANKS

    I am an MBA student living in Zambia - a third world country. I must state that your aarticles have helped me a great deal in shaperning my business acumen.

    I would however like to be more involved in the process for instance having a chance to write artcles or having to contribute on your great articles with a Zambian perspective.

    Warm regards

    •  
  • 11

    roferrada

    06/19/07 | Report as spam

    Excellent

    Excellent.
    Iam a marketing teacher and Iam going to use this article whith my students.

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  • 12

    diogosilvy

    06/19/07 | Report as spam

    The fight never ends

    This is a very informative article which can be used in a wide range of business situations. I am related to the international department of my company, and this article is closely related to some of the issues multinacional corporations have to deal with every day. With cheap labor and resources overseas, more and more companies are managing to find the answers for their problems overseas; however, great part of the same issues can be solved internally by engaging in good value strategies as well as unique market researches.

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  • 13

    mnajeeb@...

    06/19/07 | Report as spam

    De ja vu

    this particular article cites all that we have on the"issues" menu at home in Pakistan's surgical idustry. we are taking in heavy competition and rapid price delines whereas our production costs are working a parallel run as well so much so i'd like to find a solution but it seems there just might not be one especially for our particular problem where you have rising capital costs and delicining prices not to mention the chinese and vietnamese entering into the surgical instrument market with hasle free buying expereince, better quality at lower prices!! We just cant beat that since we cannot counter the pat-on-the-back by the chinese and vietnamese govts.

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  • 14

    blackhound

    06/22/07 | Report as spam

    Lobbying

    Maybe changing your government attitude by lobbying would be a good way to start. Prove to your government that chinese and vietnamese gov support gives them a strategic adventage (and more jobs, business, etc.) and try to convince them to offer some kind of help.

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  • 15

    hospito1706@...

    06/23/07 | Report as spam

    comment

    amazing recipe to win the competition

    •  
  • 16

    engage@...

    06/23/07 | Report as spam

    Nimble

    Building and implementing a sound business strategy is a dynamic process.
    .... stay nimble...

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  • 17

    swapnilsheth@...

    06/29/07 | Report as spam

    exellent article

    This article is exellent for companies in the midst of price war (Intel and AMD). I knew that differentiation is a best way to get out of price war but this article goes into more details about different ways to differentiate your products. Example of Microsoft was very help to compare this to "real world."

    Thanks,

    Swapnil

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  • 18

    sany

    07/02/07 | Report as spam

    helpful..

    i thk dis article is really helpful n it does help me 2 know more abt de strategies dat i shld use if i were in de situation as de example given.....

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  • 19

    Geoffrey James, Sales Machine

    07/02/07 | Report as spam

    Hmmm...

    UR YY 4ME

    •  
  • 20

    cdanks

    08/21/07 | Report as spam

    YY (Too Wise)

    I googled the definition of YY for those of us who missed the text messaging revolution.

    That was a crazy azz original posting.

    •  
  • 21

    danny_123

    07/14/07 | Report as spam

    view

    freshens and brushes d mind

    •  
  • 22

    schowdhury386

    07/17/07 | Report as spam

    great help to strategic analysis

    Great help get from this cases.
    Thanks a lot

    •  
  • 23

    j_antonios

    07/25/07 | Report as spam

    Great article ... but

    Dear author ...
    I think your insight into how to manage the lower-priced competition is excellent. However, you fail to tackle the issue when it comes to products that are mere commodities. In my case, I?m referring to dairy products. I?m sure you're well aware that the European subsidies on all dairy products have been removed due to shortages in supply. I currently manage what is considered the product with the highest quality in the industry. However, in commodities such as butter and cream, there is little room for differentiation. Also note that, I'm addressing the subject from the point of view of a distributor (not a producer). I would like to know your insight in to the abovementioned type of product when it comes to competing against product that offer 'almost' the same results, especially in the HORECA (Hospitality, Restaurants, and Catering sector). The latter sector is more often than not interested in minimizing costs and maximizing profits.
    I thank you in advance for your comments.
    Regards,
    John Antonios

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  • 24

    RickSchultz

    08/21/07 | Report as spam

    Ideas for differentiating an apparent "commodity"

    It sounds like your product is still differentiable, if yours is noted as the "best". Problem is how to make that matter. Locally here (Vancouver, BC) we have a dairy called Avalon that produces only Organic milk, and uses recyclable glass containers. This has a huge following, even though it costs more than competitors. Given all the fear about GMO food products, going organic is a great way to differentiate in that industry.

    What I'm getting at is that there may be externalities which allow you to differentiate. Are your cows healthier? better cared for? A specific breed? How is it you are able to define your product as "best" among others in a commoditized-market? Are you able to use that position to differentiate? Also, if you have a "best product" approach, maybe target your products upscale - don't make them available at corner stores or supermarkets, but only at, say, health-food stores, upscale hotels & restaurants, and specialty (upscale) food stores. Scarcity can provide a perception of "betterness" even if that isn't the reality.

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  • 25

    He_lives

    10/25/07 | Report as spam

    Wonderful Article, but

    I have gleaned a lot of ideas which we will put to use. However, PCs have become commodities and pricing war is very evident for agents, resellers and distributors. Even more so is the fact that this has moved upscale for computer server and storage distributors also representing the same product manufacturer in the same market. What other ideas, suggestions to differentiate?
    Customers have gotten wise to squeeze distributors to bare-bone.
    What of Partnership with customers?

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  • 26

    akimwebmerchants

    06/18/08 | Report as spam

    know your customer

    I'm not sure if I understand your situation correctly
    but consider this - as a consumer I'm to poor to afford a cheap product.

    In my country it's damn hard to find a company that will assemble a good PC for you, and the smaller this company is and the cheaper are its prices - the more likely one will have a headache with them.

    I work 45 hours a week and I praise my time and my emotional balance more than a 10-15 percent higher price for a PC. Not all PC buyers know the difference between ASUS GeForce and MSI GeForce, they just ask for a good PC for watching movies, playing latest games and writing letters in Word. And they want to buy quality - to have less headache with PC. Those fellas who buy PCs for their new office want service - so that if their accountant's PC starts to reset every day for 5 times or has terrible lag - they call you and ask you to fix it - and you do it damn fast.

    So I bet it's not the customers who rip you to bare bones, it's the lack of understanding who you sell PCs to and how do they use it, what problems do they have.

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  • 27

    Dave48000

    07/26/07 | Report as spam

    Commodity

    Price competition signals the commoditization of the offer, or the category. While you will want to hold on and continue to milk your ccurrent cash cow, it is probably past time to be looking for a disruptive technology and a restart. The restart won't succeed if it is kept under the current cost structure and policy thickness. It needs to be its own business. Don't share infrastructure. Just find the disruptive technology and restart fresh from scratch.

    While everyone says listen to the customer, that will be sustaining. Price competition will not be far behing the sustaining innovations. They will get copied quickly. So you need to listen and not listen, you need customer homogenity and scanner heterogenity, as the people who do the scanning wouldn't necessarily be your customers. You need a tempo that mixes the sustaining with the disruptive. Doing this means never being exposed to commoditization and price competition.

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  • 28

    flymulla@...

    08/13/07 | Report as spam

    How to Beat a Lower-Priced Competitor:How Microsof Beat Linux

    How to Beat a Lower-Priced Competitor
    How Microsoft Beat Linux
    I think there is vague notion of Linux taking the beating from Microsoft. In fact Linux from Red Hat started in a very small manner by offering a free floppy for trial then when it was selling the Linux is now the OS of many computers. Red Hat has already covered 15% market of the OS. I think that is a good start. Remember Microsoft is Old Corporation and Linux is the new OS.
    The age of the corporations and how Microsoft gobbled lots of other corporations like ONSTCK: the stacker) and many more except the Intuit?s Quick Records where it lost the case.
    When strong the process of swallowing many small corporations and become huge, the Linux has done well on its own.
    Sir. I think it is misconceptions that Red Hat lost against Microsoft. The way I read would be Microsoft became bigger by taking many ready software fro other dying corporation.
    That is not called competition. It is killing the competition and rule the IT.
    IMB will have Linux installed and so many others have stated this.

    I thank you

    Firozali A.Mulla MBA PhD
    P.O.Box 6044
    Dar-Es-Salaam
    Tanzania
    East Africa

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  • 29

    flymulla@...

    08/13/07 | Report as spam

    Commodity

    I think the subject of commodity trading has been tricky from very young age when we had the barter. Now comes the silver, platinum, coffee, gold, etc. Things you have not seen and you talk of the price now.
    This at times gives the example of the housewives tell of talking of,? If I had a meat shop near the vegetable shop I would sell more. Reason. Those who but vegetable will buy the meat?. This argument is out of date as the vegans come the meat and the fish eaters and the mouth and foot dieses takes toll, the house wife then already has plans of packing and selling.
    I had a chance of future trading with E.F. Hutton. I lost in silver so badly that I decided the FDR (fixed deposit receipt account was better then and futures that are in the farms or mines I have no idea how they will come out. Oil the most volatile and I would not go into their. Saudi has n idea how much it has, Russia is digging North Pole for the gas and Canada wants the share of this.
    I mean this sound childes game to me.
    There are people who have made money but there are some who have gone bankrupt.
    Well it is your money so how you invest is up to you. However, I thin the future is too obscured and the oil and the price index that has fallen down badly today 10th August 2007, makes me think I would rather have cash with me and no mortgage., If I have cash I can buy and sell anything fast,. It is liquid. Others are destination of the world unknown. You may hit the jackpot, you may sink.

    What exactly Dave has in mind? I do not know.
    I thank you

    Firozali A.Mulla MBA PhD
    P.O.Box 6044
    Dar-Es-Salaam
    Tanzania
    East Africa

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  • 30

    flymulla@...

    08/13/07 | Report as spam

    .Globlisation?????Has failed now we are rethinking

    Globlisation?????Has failed now we are rethinking.
    Please read the book by the economists. Paul Renowned British economist Paul Ormerod explodes current economic theory to offer a radical new framework for understanding how human societies and ... Death of Economics and The World is flat by Thomas Friedman. Page 390 of the Thomas Friedman book states,? China and India will carry on doing the trade the way and will not stop?. These are the economies that are going round the world buying the steel and auto to medicals and clothes chains stores together banks.
    There is cry of the rich and the elite becoming more rich and poor becoming poor.

    I thank you

    Firozali A.Mulla MBA PhD
    P.O.Box 6044
    Dar-Es-Salaam
    Tanzania
    East Africa

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  • 31

    flymulla@...

    08/13/07 | Report as spam

    Competition and you;A small change in the handling of the manpower

    Sir;
    Here are few notes that are very handy.
    The watchman. If he keeps his eyes open on the lorries that are loaded and offloaded by the next door competitor you have the game rolling. Keep him very friendly. Give him a ball pen, paper and a bonus on and off.
    The secretary is the first person anyone who comes into the office meets. Keep the secretary happy. You not only receive the mails but she will work extra hard to sell where CRM losing ground occasionally.
    The store is like the stomach that creates blood for us and the warehouse creates the profit for the corporations. If not looked and vetted properly on and off, the foods, products would stale or outdated hence need extra delicate handling? Fail here you are out of business even if you have the best soft ware for stocking. The physical count continuously is necessity.


    I thank you

    Firozali A.Mulla MBA PhD
    P.O.Box 6044
    Dar-Es-Salaam
    Tanzania
    East Africa

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  • 32

    smhashmi

    08/16/07 | Report as spam

    The article is fine, but few commnets to add on it...

    Well if you are qulity producer or service provider, abd due to the quality of your past sold items you have a good name in te market than the ompany does not need to worry about the products, in these conditions all the thinking and worrying would be on the company's compeetitors end. If the competitor sells the same item at the less price than first of all it must not be of the same quality as is yours product (assuming that you are practicing fairly by using the best possible raw material to produce the gooda and then keeping justified and fair profits), so you dont need to worry, If at all you found that the competitor is producing the product of the same quality than it must be using the low quality raw material. So all one would have to do in this condition is just to spend few pennies for the advertizing of that bad quality raw material (innocently not against your competitor) & ten you would again enjoy that profits wihout having to bear for threatening competitors atleast for some time.

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  • 33

    wjf145

    08/17/07 | Report as spam

    Lower priced competitor

    The advice was excellent. I am a consultant and have encountered this scenario many times. I do not say anything negative about the competitor but provide information why I am better, the product is better and that I and can provide more individualized service.

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  • 34

    reuben@...

    08/21/07 | Report as spam

    Customer segmentation is critical!

    This is a very useful article, but something that the author doesn't focus on is customer segmentation. It is critical to appropriately segment your customers when designing a response. Many customers may not care about the low-price offering because it lacks certain attributes. You want to limit your price competition to the appropriate markets.

    "Value Price Waterfall" or similar analyses can guide how you react in different segments, but without segmentation, you will likely fail to adequately address the low-priced competitor and siphon off profits unnecessarily from other segments.

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  • 35

    chem-labs

    08/22/07 | Report as spam

    Bundling Competitive strategies

    The article is a good read and sounds like rolling out competitive ammunition. The biggest task is in the implementation process. What strategy do you adopt if a competitor was using any of the two-punch strategy?

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  • 36

    Donna R.

    08/22/07 | Report as spam

    Good article ...

    ... if only to re-assess or re-affirm your message when dealing in a highly competitive industry. When trying to market and sell in an environment where there are always lower priced competitors and you need to develop an edge to overcome that, a confident and clear message of added value is critical. This suggests focusing on one or two primary added benefits and that serves to make clear and consistent the message, instead of stumbling through a long list of apologies/mitigations for not having a lower price. Price is not the only consideration, and this strategy makes saying that a more easily credible and defensible position.

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  • 37

    jeff.cia@...

    08/22/07 | Report as spam

    How to beat a Lower-Priced- Competitor

    Not a bad article. It touched the basics of differentiation for products and offered good supporting examples. Many companies have migrated to service business to reduce the tendency to become a commodity. I would enjoy reading an article that addresses these issues for a service business; updated thinking similar to the book "Differentiate or Die".

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  • 38

    JEMMONS

    08/24/07 | Report as spam

    Quite Interesting

    I am presently pursuing an MBA and this is one of the chapters I have recently studied. I have seen some great points that i truly agree with. Its just so amazing how strong the battle is in the business environment, its all about targeting the right segments, at the right time, and still having to manage your resources, if you want to survive. Strategy is important.

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  • 39

    sarabojanini

    09/12/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    good

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  • 40

    munjal_k@...

    09/19/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Very good. Well written with practical insights.

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  • 41

    Joefclark

    09/22/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    This is a solid article and organized quite well. I have seen executives repeatedly make the mistake of getting caught in price wars or trying to be all things to all people. Don't compete on price, compete on specific types of value focused on specific types of customers. Find the demand and create the supply for a unique value other than price. This takes discipline which is exactly why Treacy named his book The Discipline of Market Leaders.

    Read more about creating competitive advantage without lowering prices at www.mybilliondollarfruit-stand.blogspot.com

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  • 42

    Cyprianus

    09/27/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    It is very interesting
    It is very clear ang helpfull
    I appreciate that
    Thank you very much

    Hardi Pawiro

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  • 43

    koong

    10/25/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Practical... Applicable and Cheerful happy

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  • 44

    adoteyallotey

    10/25/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Interesting and very clear

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  • 45

    dpowers

    10/25/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Very timely! Glad I found this in my inbox this morning!

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  • 46

    ems1com@...

    10/25/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Most of this is a rehash of Porter's Five Forces Model who is from the Positioning Strategy School. Porter thought customers should be managed as a cost the same as vendors. Grand strategies of Cost Leader, Differentiator and Focus do not last long and give no long-term inimitable benefits. Top organizations in their field such as the Ritz Carlton understand the importance of the customer relationship that leads to co-development of value. They do this by implementing an assessment culture using fact-based analytics wrapped around an alignment backbone. Think strategic intent.

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  • 47

    tokrishanu

    10/26/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    enlightening indeed!

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  • 48

    cuneytnalcaci

    10/28/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Valuable information,thx

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  • 49

    patrickmcevoy@...

    11/06/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    This was a "good value" article and helped me. Thanx.

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  • 50

    Latif44

    11/18/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    This is an informative and relevant article on the problem faced by most of the companies in world...but its not an easy thing to choose a strict strategy.It again depends upon the company,the product and the demo graphic fact.Some times it is essential to keep the price higher to remain the industry leader and vice versa.

    One should always be aware of the operatinal costs and should try to minimize it by increased efficiency and reduced waste.

    Price reduction is one solution but not always...Innovative companies always remain a step ahead to fight and keep the competition busy.You can call it a monoplistic strategy but most of the advanced companies follow this.

    As a bottom line,it is not an easy thing to find one solution for low priced competition.All the factors should be taken into acount while making a decision and the most important is the local customised solution.

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  • 51

    Wisemanm

    11/27/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Very informative and well structured to be absorbed easily. Gives an insight to marketing for people who are not even from marketing field. It's a framework to perfection which need discipline and commitment to succeed.But the whole igredient will be of no value if it won't be practically applied, and this is true if someone considers the hyperturbulence business environment exists today.

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  • 52

    kendailey@...

    11/27/07 | Report as spam

    How to compete

    Price competition is by it's very nature destructive to all involved.

    Commodities are priced on availability and convenience.

    Convenience is a commodity to todays consumers that you can control though your go to market plan. This is also an important aspect of retail competition.

    Wal Mart cannot compete with convenience on a day to day basis.

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  • 53

    josephmartins

    12/02/07 | Report as spam

    I disagree

    "Wal Mart cannot compete with convenience on a day to day basis."

    Would you care to elaborate, Ken?

    I'm not a fan of Wal-Mart, but I disagree with your statement. It depends upon how you define convenience.

    Wal-Mart has redefined one-stop shopping with its superstores. The strategy must be working. I have yet to pass a Wal-Mart parking lot that is less than half full. Even the smaller properties have jumped on the bandwagon by expanding beyond traditional department store goods and services.

    Unless you're referring to the convenience of driving to a local variety store to purchase a gallon of milk and loaf of bread (assuming Wal-Mart isn't a shorter drive), I don't think you'll convince anyone that Wal-Mart cannot compete with convenience.

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  • 54

    SumantSood

    11/28/07 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    very informative article

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  • 55

    curtiswhauff2

    01/31/08 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    These are all definitely a great strategies! Bill Brooks has another great perspective on selling against lower priced competition using a proven selling system called I.M.P.A.C.T. No matter your strategy, low priced competitors can be beaten without giving away your margins! It's really sad to see people come in and give margin away. They just devalue their entire industry, which makes it so difficult for those who spent the time and energy building it up.

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  • 56

    werhardt

    01/31/08 | Report as spam

    We need specific articles

    Hi !

    I always wonder when I read this type of articles that the authors forget that there are various types of sales transactions in the world. And the rules for the game are different from environment to environment of the games.

    For example, the above article may not apply to Larger sales ( please refer to SPIN selling for this word).. I expect from an expert to address a specific area and not write a general article. General types are available everywhere and does not add value to the readers.

    No criticism is intended.

    regds

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  • 57

    desgray

    02/04/08 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Great, well laid out. Your article hits it right on the nose! And yes different industries have different quirks, regardless in the end the same basics apply. Other strategies can easily be added to give more power to those mentioned. Many business owners/salespeople lack the 'higher-end subtle skills'- the more developed these are, the less sensitive the price issue becomes, to the extent that it completely disappears.

    If you want to get better sales, develop your 'hands-on subtle skills'. Be aware the majority of 'resistance' in any selling situation comes from the salesperson, and is then transferred to the prospect. Go in nuetral and you'll add hugely to the desired result. (30 yrs business ownership experience within different indusries).

    desgray
    desgray.com

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  • 58

    joaomiguel.pereira@...

    06/23/08 | Report as spam

    Nice groundwork!

    Nice groundwork!
    Here all together, J. Anderson and J. Narus with "Business Marketing: Understand what customers want" - (HBR Nov-Dec 98), Rita McGrath and Ian MacMillan with "Market Busting: strategies for exceptional business grow" - (HBR March 2005) and "Discovering New Points of Differentiation" -(HBR Jul-Aug 97). And the old? But splendid, 79's "How Competitive Forces
    shape strategy" by Porter?

    Nice work! Thanks for making all this like an epiphany on those articles, including the more recent Porter work - "The five forces that shape strategy".

    From here,is up 2 you.

    Great school

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  • 59

    moojie13

    06/24/08 | Report as spam

    RE: How to Beat a Lower-Priced Competitor

    Looking for a strategy for service based product rather than a manufactured product. Can make some of these ideas work, but, would really like to see a strategy focused on the service industry. Thanks

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  • 60

    Geoffrey James, Sales Machine

    06/30/08 | Report as spam

    Your wish is my command...

    Check this out:

    http://blogs.bnet.com/salesmachine/?p=360

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