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A Strategy for Price Competition

Posted On - 05/07/2013 15:20:03

Click to download a copy of the full SummaryI broke a promise: I said you'd have this two weeks ago - ‘A Strategy for Price Competition'. Why'd it take so long? Simple really. If I was going to put one in front of you you'd have to feel it realistic and genuine. And the only way to do that was to go through the process using a competitive landscape you'd accept as realistic. So I took an imaginary business - URPCSFIXED Limited - and 8 competitors, ‘gathered' competitive intel on them, analysed it and then, formulated a strategy to deliver competitive advantage. And doing all that took a bit more time than I'd anticipated. But here it is and you can see part of the summary oppostite - or download a full copy of it if you want: just click the image.

Was this really necessary?

Competing on price is easy – just sell cheap! If you believe this you are completely mistaken. There are all sorts of reasons why it's not true. It won't and doesn't work.

Don't believe me? Try this.

Our 2nd Retail Price Comparison – now with over 200 independent retailers contributing - confirmed what we found in the 1st: those who sell low have the worst satisfaction with their sales. Selling low does not work! It does not give you competitive advantage. Because competing on price is not just about price - it's about value.

The truth is if you are to make a success of competing on price you have to be able to compete without it. You have to be able to compete on a host of other differentiators with nothing whatsoever to do with price. Your knowledge, expertise, your place in local communities, honesty, reliability, and a host of other ‘soft' stuff. Competing on price isn't just about numbers on tags, it's about image and reputation.

What's in a strategy?

It's easy to get hung up about what strategy is and isn't. Don't. All that really matters is that a strategy is a plan about how you'll do something. So a Strategy for Price Competition is a plan for how you'll respond to the pricing opportunities and threats your competitors present you. About how you'll rebalance things and create yourself competitive advantage. Simple. Now sure, creating one takes time and effort. I won't deny it's a job of work. But what you get as a result is beautifully elegant. No longer will price be your master. No longer will every decision you make on price need to be be a separate decision you have to make at the time. You'll know why your prices are what they are and how you set them. You'll have a confidence and credibility that only comes with knowing precisely what your competitors are up to. Most of all you'll be supremely prepared for when people challenge you on price. You'll know your prices are right and you'll know you're offering ‘fair value'. You can explain and justify them rationally, sensibly, reasonably and completely. All this because you found out about your competitors and thought how you'd respond to the opportunities and threats they present you.

How to write a Strategy for Price Competition?

How to Compete on Price' set out the principles on which a Strategy for Price Competition should be built. And here I've shared with you the Summary of that strategy. So you can see what all the 'talk' actually leads to. But how did I get here? What did I do? How did I do it? And what does the rest of the strategy document look like? For answers to these questions I've created the following blogs that'll be released over the coming weeks:

  1. A Strategy for Price Competition (this blog). Opens the series with the key part of a Strategy Document: the Summary. Comprising specific detailed actions this blog sets out how an imaginary business - URPCSFIXED Limited - plans to create itself competitive advantage
  2. Sizing Up Your Competition. Scope is critical to Strategy development as it defines which competitors will be considered against which competitive factors. Importantly it also defines how much work will be needed to deliver the Strategy. This blog is about understand how to set Scope
  3. How to Gather Competitor Intelligence. In ‘Sizing Up Your Competition' I described how to define the information you need for your Strategy. In this blog we cover techniques and practices to lay your hands on it
  4. How to Mystery Shop. Whilst there's a huge amount of competitor data that can be captured remotely, there comes a point where either you just can't get it so or its nature means you have to actually visit and experience what your competitors do first-hand. This blog sets out how to do that
  5. Mapping Competitive Position. The process of gathering competitive intelligence delivers large amounts of information. But the issue is how to make sense of it all. In this blog we look at the issue of Competitive Positioning - how other competitors are all positioned relative to you. Using a tool called The Value Matrix, we plot URPCSFIXED competition helping us better understand the real nature of the threat they pose
  6. Finding Profit Opportunities. In Mapping Competitive Position we looked at competition competitor by competitor. And that helped us understand which competitors were better than URPCSFIXED and which weren't. But, this approach doesn't help with price setting - that needs products/services to be reviewed across competitors. More, even just being consistently a little more or less than competitors has huge implications not just on reputation, but on profitability. This blog discusses these things
  7. Formulating Price Competition Strategy | Part 1. One of the most difficult steps in formulating strategy is understand which competitors matter most and letting go of those that don't. Without an unimpeded view of those who are really winning customers away from you, there's no way you can develop a strategy that counters their draw. This blog tackles the issue of what matters and helps you define how to improve your business
  8. Formulating Price Competition Strategy | Part 2. Because you can only charge what you're worth, Part 1 dealt with identifying and improving URPCSFIXED. It focussed on helping us understand how UPCSFIXED needed to improve its 'worth'. In Part 2 we take strategy formulation to the next and final stages: defining price changes and articulating URPCSFIXED Strategy for Price Competition. This blog conlcudes the series 'Price Competition Strategy'
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