Once again, I would like to compare many of the concepts I learned in this article to the dating scene in Provo. The diagram “A framework for responding to low-cost rivals” from the article provides a very accurate representation of the decision process on how to react when a freshman girl moves into your ward and begins to pursue the guys you’ve spent all year admiring from afar.
First, you need to ask, “Will this freshmen take away any of my present or future customers (boys)?” If she is not very cute, then the answer is no and you can just watch her closely but don’t take her on. If she is hot, then of course, the answer is yes, so move on to the next section which recommends “Don’t launch a price war (competition) with her. Increase the differentiation of your products (looks, intelligence, sense of humor) by using a combination of tactics.”
The next question you should ask yourself is “Are there sufficient numbers of consumers (boys) willing to pay more (not go immediately for the easy target) for the benefits I offer?” If your ward is small or the guy to girl ratio is less than ideal, then you might be better off following the diagram recommendation to learn to live with the smaller company (freshman girl), i.e. be nice to her and become her friend. However, since this is Provo and the wards are very large, the answer to the question would be yes and therefore your best move is to intensify differentiation by offering more benefits (learn how to cook, go back to school and get an MBA). This should increase your value to potential ECs and not be as “price sensitive” to the easy target in front of them.
Although my comparison to the Provo dating may seem superficial, it provides a very concrete, real world example of the economy of competing against rivals with lower costs. Ultimately, it is the consumer’s decision what is most important to them: quality or price. Just as we “established companies” must survey the competitive environment we are operating in and respond accordingly, so must the “consumers” decide whether they want cheap and easy right now or quality for the long term.
*Based on the article: "Strategies to Fight Low Cost Rivals." by Nirmalya Kumar from Harvard Business Review Volume 84 (2006) pages 104-112.
3 comments:
What is the abbreviation EC?
EC = Eternal COmpanion. Hahaha!
Newly acquired skills, talents, and makeup will definitely increase your value, giving you that competitive edge over newbies. BUT...and there is always a BUTT...what if the new girl has a really nice butt? What can an established company do to counter that?
I ask this because you are assuming that the new girl is low-cost. But a nice butt would make her quite expensive, if you ask me.
Oh, and what if the tables are turned, and YOU are the new girl in town? Do you lower your prices?
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