When Good is the Enemy of Great

Many a brand has fallen victim to discounters and competitors who are “just good enough.” Even mighty Gillette (owned by Procter & Gamble) is subject to price competition in a market where they command a 52% share. The company recently announced price cuts, in the wake of losing share to the likes of Harry’s and Dollar Shave Club. Those brands certainly sell quality products, but can’t match Gillette feature for feature. Yet Harry’s and Dollar Shave Club are having a field day, positioning Gillette as a purveyor of “insult pricing.”

We work with many premium providers who are wondering what to do, as copycats and bottom feeders invade their markets and take away loyal customers who had gravitated to their superior quality. We see similar behavior with service businesses and B2B. Buyers are showing greater indifference to quality, often switching to save a few nickels.

Here are several strategies premium providers can utilize to defend their turf:

Focus on relative value– Every provider should conduct a value chain analysis to identify which features provide the greatest relative value versus the resulting price premium. To learn how to conduct a value chain analysis, download our white paper here.

Offer a defensive brand– Providers afraid of devaluing their brand with a lower price offer will often develop a new lineup under a different brand name, such as Tumi’s T-Tech brand. The fatal flaw with a defensive brand can be when a provider is unable to untangle their service offering. It is critical that such vendors do not “over serve” with unneeded features or services. The dilemma is that these are often the same features that differentiated the brand in the first place, so being intentional about the service bundle or feature set is critical.

Swim upstream– Some companies have added more services and increased their prices to create more distinction from the middle of the pack, where there is the most competition.

Be attentive to the rule of threes– If you have three price options, customers will select the middle choice about 60% of the time. By adding a higher price tier, providers can drive customers to their middle-priced offering.

Penetrate a more finite niche- The biggest mistake we see with marketers is that their target audience is too broad. Unable to execute across many categories or verticals, they fail to create differentiation or fulfill client needs. With hyper-competition comes hyper-segmentation, so marketers should be intentional about carving out very specific niches.   

Indicate points of difference- Premium providers must be superior at creating and communicating differentiation. A common differentiator among premium providers is authenticity. For example, Harley Davidson can point to its originality and years in business. Yet even companies that have true differentiating strategies are often poor at telling their story. It is critical to have testimonials, case studies, white papers and rich media that communicate value.