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    Competitive Strategy:
    Six Alternatives to Cutting Price

    Strategies to Use When Writing A Marketing Plan

    Building a competitive strategy is a key part of writing a marketing plan. Price is part of the marketing mix: focus your efforts on building a competitive product pricing strategy for your business. There are alternatives to cutting price: discover six effective pricing strategies.

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    In business, pricing strategies dominate as the Number One competitive strategy. Why?

    Because in small, medium and large businesses, the easiest, and most often used, strategy is to reduce price.

    In many businesses and industries it is the first, and sometimes the only, strategy used (build an alternative strategic plan that takes a different approach).

    However this cutting-price strategy, while appropriate in some cases, is the most costly, the most disruptive to the market, and the hardest to reverse.

    Once you have lowered the price, moving price back up to where it should be (and needs to be to survive and prosper) is next to impossible.

    Small business competition is fierce and aggressive. Small business owners need to focus on how to enjoy successful competition in business. Yes, competition can be enjoyable and there are some surprisingly effective, and fun, strategies to try.


    The Best Competitive Strategy for Your Business

    Pick from These Six Alternative Strategies to Cutting Price:

    1. Match or exceed your competitor's strengths: for example, focus on your service advantage, quality advantage, product differentiation or services with new and/or differentiating features.

      Know your competition and challenge them in areas where they are weak; and you are strong. Make sure that you conduct both an industry analysis and competitive intelligence to understand your competition.

    2. Now that you know your competition's weaknesses, focus direct attention on those weaknesses. Focus on your competition in business.

      1. Go after customers who are unhappy with competitor's service and/or quality;
      2. Move in on competitors who have low brand awareness;
      3. Concentrate on geographic regions where competition is weak and you can quickly grow market share;
      4. Pay attention to buyer segments that the competition is neglecting or cannot serve well.
    3. Simultaneous competitive strategic plan checklist for initiatives on many fronts

      1. Increase your advertising;
      2. Introduce new products or services;
      3. Provide rebates or incentives (not the same as price cutting);
      4. Offer special product or service promotions (buy 2 get 1 free);
      5. Improve your productivity which will result in lower unit costs, which then allows real lower pricing (you share the efficiency with your customer).
      6. This will throw your competition completely off-balance as they don't know what to respond to first. It will also divert their attention from one tactic to deal with, to many; and it will be hard from them to win on all fronts.

    4. Avoid head-on competition and move to less competitive ground

      1. Navigate around your competitors. Be agile. Focus on unoccupied or less contested market territory and change the rules of the competitive game;
        1. Introduce new products and services that redefine the market
        2. Build strong positions in geographic areas where close competitors have little or no market presence; and where those in the marketplace are not well equipped to face you
        3. Create new market segments by introducing products with different attributes, performance features, and benefits to better meet the needs of selected buyers
        4. Advance into next-generation technologies to replace existing technologies
      2. Avoid head-on challenges that are typically costly and that are tied to aggressive price cutting, escalated advertising and/or costly efforts to out-differentiate competitors;
    5. Unconventional Competitive Strategy

      1. Look for the Hit and Runs: you want to try to grab sales and market share wherever and whenever the competition is asleep and then run with the orders: look for an opportunity to attract your competitions' customers.

        For example, unpredictable raids on customers with tactics such as occasional and random service changes, product changes, even price changes; inconsistent and unpredictable and hard to follow or copy along with strong promotional and marketing activity. Your focus as a business using this type of offensive is to have your ear to the ground to learn when competitors have had delivery issues, service challenges and/or quality problems; then build your competitive strategy around what you've learned.

    6. A Defensive Competitive Strategy (also known as pre-emptive)

      1. Move to be the first adopter (with new services, products, markets). This will give you the advantage and discourage other competitors from entering the market (because of barriers to entry such as high cost, lack of skills, lack of reputation or brand, lack of people, etc).
      2. This is a one time move; whoever enters the market first wins the competitive advantage (might not win the market if you do not use that enters-first advantage).
      3. Some examples:

        1. Acquisition: buy the majority or exclusive control of a product or service;
        2. Recruiting employees: hire the recognized-as-best sales people in each market segment;
        3. Contract for the best, or the most, raw material sources. Or the best supplier(s). Write exclusive contracts, or long term contracts, or exclusive partnerships, or acquire the supplier and tie it all up;
        4. If you move into new markets, find the best geographic locations and place your best staff in that location (especially if the competition isn't there). For example, if opening a branch in California and manufacturing out of Wisconsin, make sure you send your best staff to start up the plant; and stay until that advantage is replaced by another advantage.
        5. Make sure your customers are good customers with high brand value. Promote that relationship (with their permission). Your connection with those customers will help build and strengthen your brand and reputation and help you win new business.
        6. Increase your capacity or products or services ahead of market demand to discourage competitors from following: remember the first into the market typically will dominate and competitors will be concerned that the cost of entry is too high (threat of over-capacity, under-utilized assets, and more). And make sure that your product positioning is appropriate for the target market.
        7. Build your brand so that it is unique, and difficult to imitate, but also so that it is a strong and compelling value proposition.
      4. To be successful, this defensive offense does not have to totally block competitors from following or copying; it can give the company the first and prime position which is difficult for competitors to overcome.

    Many businesses use pricing strategies as their first, and primary, competitive strategy. However they often don't move past cutting prices and using better, more effective strategies.

    When writing a marketing plan, you need to focus on best-fit strategies for your specific business. Consider specific marketing mix strategies (such as a product pricing strategy or a product positioning strategy) that are right for the products or services you are marketing.

    The best competition in business is where effective
    strategies are being employed.

    Building the right competitive strategy for your business means trying a new approach to business competition that will work for you, and help you to make a profit.

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    Price and Your Business

    sale price

    Pricing is the foundation of your business success.

    Interestingly many businesses focus on either building their price structure by using costs as the basis OR by using market information (that is, what the market will pay).

    The reality is that the price needs to be constructed with both costs and market forces as part of the consideration. Additionally, the product or service value (ranging from commodity to luxury) plays a role in price strategy.

    Building a strong pricing program is part of your marketing mix activities (product or service; promotion; place or location; and price). Many businesses focus most of the marketing attention on developing the product or service program and then promoting it; make sure you give price the time and attention it needs.

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    Price + Consumer Markets

    price change

    Businesses need to be more aware of the power of competitive and comparative markets than ever before.

    Why?

    Because technology and the internet makes pricing information available 24 hours a day, 7 days a week.

    Customers use their mobile phones, laptops and even desktops to price check and compare.

    The speed of pricing changes makes this an urgent action item for all businesses.

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