If you look closely at the business environment, you will notice that it is being too saturated with goods and services. If you look closely enough, you will find that many of these goods and services flooding the business place are all the same. Many of them seem to be solving the same problems for customers. As a result of this, prices are becoming even more competitive, and lower.
As a student of strategy, low cost leadership, also called The Chinese effect, is simply defined as reducing the cost of goods for market penetration and domination. As good as this strategy sounds, it has so far it can go; It isn’t always sustainable in the long run for many businesses. When prices of goods and services are consistently reduced to accommodate the increasing demands of customers for low priced goods, organizational sustainability will suffer.
In business, as prices are consistently reduced, quality will suffer. And only the smart entrepreneur that understands how to implement the next big thing can wade these murky waters of business and come out successfully.
The next big thing that will make an entrepreneur survive the battle of excessive price reduction is called product differentiation.
An organization differentiates itself from its competitors when it has studied the market and provides something unique to buyers beyond offering a low price. The good thing about this strategy is that it allows you to charge a higher price for your product and services.
Product differentiation makes you stand out among your competition. It makes you shine in the marketplace irrespective of the price. Many times, customers need something different from what they are used to. And they wouldn’t mind paying for it. Product differentiation was what the late Steve Jobs used to make Apple become the market leaders in their area of expertise. Apple sold a product that gave her customers an exciting experience they had never had with products in the same category.
Another great thing about product differentiation is that it engenders sustainability. When products are differentiated and price increased, the organizational bottom line is always increased. This also increases the longevity of the organization and affords it more money for radical innovations.
As an entrepreneur, always understand that while offering low price is a good market penetration strategy, product differentiation is a better market penetration strategy. Differentiate your products by adding so much value that customers are willing to pay anything for it. These differentiation could be in taste, experience, class and package.
As a smart entrepreneur, you can start with low price and up your ante to product differentiation. This is exactly what Infinix and Techno, another phone company, is currently doing. Remember when Techno first came into the market; it was regarded as a phone for the lowest class. But today, the story is different; even the elites use Techo and Infinix.
In business circles, to achieve sustainability, think product differentiation. It is the next big thing.