0 – 100 kilometres in 2.5 seconds

reduce price competition by eliminating comparisons

This is the fourth of 10 ‘BEST OF THOUGHTS’ from the more than 200 THOUGHTS published in 2018.

Competing on price has long been a characteristic of commodity marketing. It is now becoming increasingly common for brands. Despite this trend, most businesses would prefer not to compete on price and research suggests that it is often unnecessary. Jeff Bezos, CEO of Amazon, suggests that the best way to avoid the focus on price is to understand the customer and to use that understanding to drive brand loyalty.

This THOUGHT considers strategies that might be implemented to avoid competing on price.
Consider the prices and performance capabilities of these vehicles:

  • Holden HSV V8
  • Performance    0 – 100 kms in 4.4 seconds
  • Price                     $92,900
  • Nissan GTR Nismo
  • Performance    0 – 100 kms in 3.28 seconds
  • Price                     $299,000
  • Lamborghini Huracan LP580 – 2
  • Performance    0 – 100 kms in 3.55 seconds
  • Price                     $379,000
  • Porsche 911 Turbo
  • Performance    0 – 100 kms in 2.99 seconds
  • Price                     $456,000
  • Bugatti Divo
  • Performance    0 – 100 kms in 2.50 seconds
  • Price                     $8,000,000

Buyers of fast cars may be familiar with each of these vehicles and, in terms of speed, they are comparable. In the scheme of things, 1.9 seconds over 100 kms (the difference between the Holden and the Bugatti) is not much. However, it is unlikely that the two vehicles would ever be compared. They are in very different product categories.

The Holden and the Bugatti are incomparable. But so are the Holden and the Nissan, the Nissan and the Lamborghini, the Porsche and the Bugatti. All of these products are in very different categories and will rarely, if ever, be compared. Very rarely will any of these vehicles compete on price.

The differences between any two of the European vehicles are not well understood by most consumers. However, price is rarely a point of comparison. All five vehicles listed above are in different categories and target very different markets. Each has very different competitive advantages, which are relevant to different target markets, and each sells well within their respective market.

Differentiation is central to not competing on price. Positioning products in very different categories can help to differentiate them and, to some extent, price becomes a component of that differentiation.

It is very difficult to compare price when two products are well-differentiated. It is nearly impossible and, certainly, irrelevant when they are in different product categories.

INSIGHTS

Identify a point of differentiation that is relevant to the needs, wants, and expectations of customers. If possible, position the product in a new, different or even unique category. Realise the potential of product definition and categorisation. This is something few businesses do well.

Put the facts ahead of intuition and guesswork.

THIS WEEK’S SOURCES

Dent, AMA, ShopifyPlus, Entrepreneur, Beyond Philosophy, MarketResearch.com, Moreforsmallbusiness.com, Hubspot, Beyond Cost Plus and Blue Stout.
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