Paying Too Much Attention on Price Competition?
People often spend more time figuring out how to build their fantasy football teams, plan their vacations, and handle other various unimportant matters than they spend on building their business strategy. While strategic planning is more difficult and is likely to result in some mistakes, not putting the proper time into strategy is inexcusable. Business strategy should be revisited at least quarterly in every business. Most companies do not make the time and it costs them millions in future revenue and profits they’ll never see.
Too many companies make a lot of changes to the business only to find that those changes had little impact on its ability to increase market share, or worse yet, caused market share to decline. It is also common to go into companies and find only a small percentage of their clients/consumers showing loyalty. The predominant discussions among their salespeople revolve around price. Many business owners mistakenly believe there is nothing that can be done to change client/consumer focus on price.
A big part of building a strategy that helps avoid price competition is having the ability to segment the potential client/consumer base and target ownership of specific segments. The more segments you want to own, the higher your cost structure. The key to segmentation is not looking at market segments by customer size, geography, industry group, or other traditional demographics, but to look at them by need or want that your company best serves. Here are some examples:
- Are they the type of customer that only looks for the lowest price no matter what?
- Are you in the hospitality business and are they looking to be pampered?
- Are you in the fitness business? Are your target customers the ones whose doctors have told them that they will die before 40 if they do not trim 40 pounds?
- Are you in transportation, freight forwarding, and logistics industry and your clients are always squeezing you for the lowest price? Could you charge them more and still save them a lot of money if you helped them solve the inefficiencies in their logistics functions?
When developing your strategy, you must understand the potential marketplace at least 3 years out and project how you think your industry is changing in terms of products, customers, technology, delivering products and services, sophistication of employees, and other pertinent matters. Once you’ve considered these factors, you need to segment the different types of clients you have and which segments you want to own. Then build your strategy to own them. Just take the time to build a winning strategy. The results will be considerably more rewarding then winning in fantasy football.
Howard Shore is a business growth expert who works with companies that want to maximize their growth potential by improving strategy, enhancing their knowledge, and improving motivation. To learn more about him or his firm please contact Howard Shore at 305.722.7213 or firstname.lastname@example.org.