Question

Topic: Strategy

How To Differentiate In A Price War?

Posted by Anonymous on 4/22/2004 at 3:07 AM ET 250 Points
In a specific geography for an engineering product requiring compliance with national specifications, a price war breaks out -- mainly due to excess capacity in industry . This is compounded by the predatory pricing by one of the players, who has the ability to survive the negative contribution due to cross subsidisation from other businesses in the porfolio. The product is a tier 3 product into Telecom networks and is critical for uptime of the network. The actual user / service provider buys the product bundled together with another equipment ( tier 1). The intermediate buyers have driven the prices low by virtually commoditising the product, as the differentiation is in LONG LIFE which is not the concern of them during the limited warranty obligation extended to service provider.The avenues to differentiate are limited as the reliability and life are the parameters--which are not the prime concerns of intermediate buyer..
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RESPONSES

  • Posted by Chris Blackman on 4/22/2004 at 11:12 PM Accepted
    I think you already answered your own question. Your differentiation is in Service Life which probably means (as per Jim Deveau's reply) that the overall economics are different (better) for your solution because of a lower (my assumption) Total Cost of Ownership (TCO).

    However, you also point out you could resolve the problem by bundling except your intermediate buyers unbundle/rebundle so the ultimate customer doesn't get the benefit you intended. Sounds like your channels are hijacking your initiatives. They should be working for you, but they are putting their own interests way too far ahead of yours.

    I would be having a long, hard look at my channels and thinking about a reorganisation, perhaps a consolidation of channels to get them working properly for me. You deperately need the marketing (and sales) messages to be working in alignment through the channels, and that seems to be where you are coming unstuck.

    You seem to have a strong TCO story to tell, even before you undertake a leapfrog strategy. If your primary route to market is currently via these self-focused intermediate channels, you must get them singing your song for you.

    Otherwise sack them all and start selling direct.

    Good luck

    ChrisB
  • Posted by jcmedinave on 4/23/2004 at 12:24 PM Accepted
    If the problem is not only prize but product, you will have two alternatives:

    1. Offer the same Quality of product with a competitive prize and offer in addition the upgrade product if the customer will need it in the future.

    2. Wait until the customer will get conciseness of your product advantages, and try to incentive it. How? With real business and customers examples, Quality associations references, People influences, and be in permanent touch because your opportunity will come.

    But, be aware that maybe the present problems of your competitor could be solute, in the near future. Could be a good strategy to gain the customer with prize and then upgrade the product in the future.

    Bye,

    Juan Carlos
  • Posted by SteveByrneMarketing on 5/26/2004 at 8:06 PM Member
    Raise your prices!!!


    good luck
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