traditional, low-cost leader strategy is a battle between companies to discover
which will come out as the lowest cost manufacturer of products or services.
The company that wins the contest can decide how high or low its profit margins
will be, set prices low enough to drive competitors out of the market, and keep
new entrants out of the market.
this may sound like an excellent position to be in, it can be a difficult one
to attain. A company with a cost leadership strategy sells at high volumes to a
broad market at low prices. Companies achieve this selling-on-price model by
making significant investments in production and distribution operations,
implementing ever-tightening controls on production costs, and building a
supply chain willing to sell at deeply discounted rates.
small business owner, you may covet the leadership position, but recognize it’s
most likely not the best fit for your operation. If you can’t sell your
products on price, then how will you be successful?
The lowest price isn’t
always the answer
think that everyone is just looking for the best price they can find. But here
are some recent consumer buying trends you might want to consider:
● Only about one-third of consumers buy solely on price. The
rest are also interested in other benefits of your products.
● Fifty-three percent of customers say quality is the No.1 factor in their
buying decisions as compared to 38% percent who rate price as the compelling
entirely possible that by selling on price, you could be turning off customers
who are more interested in quality. Small businesses will be better served to
compete on differentiation and value rather than selling on price to win these
Know your niche
Cost leaders sell to everyone; that’s
how they can reach the economies of scale they need to drive down prices.
Highly-segmented markets that require brand loyalty, quality, and value over
price are not likely to attract enough customers to make such a model work.
That’s where smaller-sized businesses
are particularly suited to play and win in the value-selling game. Your success
lies in your ability to highly satisfy a targeted market—firms or consumers—who
are willing to pay more for receiving more value.
Take time to identify your ideal
target market and what drives them to pay a higher price for their products and
Sell the value
essential thing a business can do is deeply understand what needs your products
satisfy. Nearly all buying decisions happen at an emotional level. Do you know
what your customers’ emotional needs are that would cause them to buy your
product? What do they desire? What pain do they want to avoid? What will make
them happier or more productive?
you’ve identified the emotional drivers, determine the attributes of your
products that will meet those needs. Sharpen your pencil, get your leadership
team together, and dig deep. Many times, it’s subtle things that differentiate
your company and your products from your competitors.
Build a better product
You have identified your target
market, those things your customers truly value, and why they would choose your
product. Once you are selling your MVP (minimum viable product), your efforts
should focus on driving additional value through updates, new features,
upgraded packaging, and other enhancements your customers express interest in
By developing and integrating these
features, you give customers more of what they want, and you can sell at a
higher price. According to marketing experts, upsells and add-ons will increase
your revenues significantly. Statistics have found that the top 4% of your
customers will pay 16 times more for added value to your products.
Value is more than your product
Today’s consumers have more choices
than ever. Technology creates products that leap-frog each other with
incredible speed. Product differentiation is challenging to sustain. Your
company has to mean more to your customers than merely the products you sell.
You can avoid selling on price by
rather than features—how your products help customers achieve their desired
2) Your company—its history, mission,
vision, and values
3) Stories—your customer success
stories, case studies, and testimonials
Stick with it for the
Value-based selling isn’t an
overnight wonder. It takes discipline, focus, and conviction that proving the
value of your products will be more impactful than simply placing a lower price
tag on them.
In the meantime, you can emulate the
low-cost leaders by reducing your operating costs. Cost-effective contract
labor solutions give you an experienced workforce without having to hire
expensive in-house labor. When your costs are lower, and you’re getting a
value-based price for your products, your margins will skyrocket.
Add value with outsourcing
Local, non-profit contract labor
solutions, like those provided by Ohio Valley Goodwill, can bring additional value to your
business by increasing lead times, reducing overhead costs, and improving
Unlike some outsourcing firms, Ohio
Valley Goodwill doesn’t work with for-profit middlemen. Our only bottom line is
the value we create for local businesses and job-seekers in our community! We
are a non-profit partner that businesses in Cincinnati, Northern Kentucky, and
Southern Indiana have trusted for decades. Best of all, businesses that partner
with Ohio Valley Goodwill for contract labor solutions become a part of our
social mission to provide meaningful employment opportunities to individuals
with disabilities and veterans.
learn more about contract labor solutions provided by Ohio Valley Goodwill’s
Industrial Services Division, please contact us today. We’re happy to provide a free
quote and a tour of our Cincinnati-based facilities!