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Mapping Competitive Position

Posted On - 08/08/2013 13:13:15

If you believe something is better you'd expect it to cost moreDoes a low price mean good value or bad quality? Can something cheap be worth much? What matters is if you believe something is better you'd expect it to cost more. And the better it becomes - the more you want it, hanker after it or even crave it - the less price matters. To successfully compete on price you have to do more than contend on cost, you have to understand value. It's the combination of the two that matters and knowing how to make sense of them is what this blog is all about.

Setting the scene

This blog is part of series on how to write strategy. Its objective is to do everything possible to help you write your own, without actually doing it for you. Using an imaginary business – URPCSFIXED Limited - with 8 fictitious competitors, it illustrates the process end-to-end. Each blog represents a major stage of strategy development with detailed guidance, tools, templates and the appropriate part of the Strategy Document fully written up, given. For more detail on the different blogs in this series and how they all fit together, see ‘A Strategy for Price Competition'.

What is value and why does it matter to Price Competition?

Probably the best place to see ‘value' is at an auction. As the price goes up, so people stop bidding – each where they feel what they're buying isn't worth the price. Now, there may be many reasons why people are prepared to pay more for something than others: it completes a collection, is a particularly special example and so on. Whatever, one thing is true: they paid more for it because they valued it more. But how is this relevant to selling computers and services? If people don't believe you're better than your competition then at best they'll value you the same as them and at worse, less. And this is the crux of it: it's not price that defines you, it's how good you are. Price competition isn't just about the number on the tag, it's about the customers perception of the value in doing business with you.

It's your utility that makes you better

What makes people think something is better than something else?‘Better' is better right? Well yes, but what makes people think it? Well, we've spoken about these things before but to be fair not quite like this. About how certain ‘utilities' create an impression of ‘better'. What are they? Business reputation; perceptions of ease and convenience; street presence; shop layout; products/services range and merchandising; staff friendliness, presentation, product and technical knowledge; and customer care. These things – these utilities - matter. These are the things – completely unrelated to price – that create an impression of whether you're better, or worse, than your competition. And when you take your utilities with the prices you charge, your unique value is defined.

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