February 23, 2010 at 12:39 pm | Blog
As highly-competitive manufacturers and retailers become lost in a sea of sameness in the eyes of consumers, it is up to the brand to catch the focus of consumers’ eyes and differentiate from competitors.
Following the introduction of the Apple iPad, Hewlett-Packard began discussing setting prices on its anticipated PC version of a tablet to directly compete in price with the Apple iPad.
While Hewlett-Packard could easily uncover and tout its competitive advantage against Apple – for example, amidst the popularity of the iPad, HP’s disruptive technology in an emerging competitive marketplace for tablets holds a strong value in consideration of the demographic preferring PCs over Macs – HP plans to cut below the prices Apple sets for is iPad tablet, and Apple is prepared and financially able to fire back at the first shots in an all-out price war.
While engaging in a price war looks to be the best step in gaining consumer attention, it’s the first step to the bottom of the profit margin ladder, preventing an entire industry from maintaining a competitive position in supplying consumer demand at a profitably-set price.
Through means of specific differentiation focusing on product knowledge, unique customer experience and an overall outstanding set of customer service accommodations, a brand increases the specific value brought to customers in the transaction, maintaining and creating competitive advantage outside of engaging in a price war.
Great examples abound in manufacturing and technology: one company jumps into the slippery slope of lowering prices to compete, and with it drags an entire industry down. Apple iPad struck up a price war with publishers competing for maintaining a higher price, resulting in a reverse price war on e-Books. Toyota’s competitive advantage was a strong, forward message; if Toyota is wise it will maintain a competitive position through customer service and how it handles the recent recall.
E-Trade cut broker prices, and brought with it the entire trade brokering industry to level the playing field at the cost of an overall loss of profits. Once a company offers a product or service for a low price, it is nearly impossible for it to justify an increase in price later on. Maintaining a competitive advantage against other companies without engaging in a price war yields higher profit margins and increased market share value.