Overall Cost Leadership Strategy Might Be Hurting Your Business


Although many businesses have strived to be the overall cost leader in their industry it might not be the right strategy for your business.  Before you determine your pricing strategy you must decide if you want to be Walmart or Nordstrom’s in your industry.  Each company has a different definition of who they are in their respective markets.  Price needs to be determined based on your overall business strategy.

Your overall business strategy is the determination of how you want to compete in your market and is your competitive long-term advantage that you will have in your niche. Your overall business strategy needs to be based on your product or services unique advantages over other companies offerings and must set up apart from the competition.  I refer to this as your Core Unique Position in your marketplace and this should never be based on price alone. Price is not a long-term advantage for a company as prices change all the times and competitors can lower their prices.

You may not agree with my thinking because you might think of Walmart and how successful they are with keeping costs down and knocking off competitors yet Walmart has to focus daily on lowering and decreasing costs and appeals to customers looking for low price only.  If a company figures out how to lower their prices beyond Walmart, Walmart will lose their footing in the market fast as their only point of differentiation is being low cost.

Just in the news this week was the talk of K-Mart and Sears closing more stores with K-Mark closing 35 and Sears 43. They just can’t compete on lowering prices anymore. For now, Walmart is the company beating out all retailers on low price – however, that is for now. Someone else who is no frills will come along and beat at Walmart at some point because their only differentiation is the price.  I suggest one day Walmart will be removed by another competitor who will be able to sell merchandise for less.

Create a Core Unique Positioning Statement that has nothing to do with pricing.

Want to run it by me to get me thoughts? Schedule a quick 10-minute chat now.