Enterprises that use low-price strategy as a means of competition always have a poor reputation in the industry, and their peers are either afraid or disdainful, but they have no choice but to face it. So why are there low-priced competitors? Does their appearance mark some kind of signal? What are the weaknesses of low-priced competitors? What are the main strategies to compete with them?
The emergence of low-cost competitors
As a basic competitive strategy, low-cost competition may appear in any industry and at any stage of development. On the surface, it seems that there are no rules to follow, but in fact there are still some * * * characteristics. When low-cost competitors appear and are threatening, it often shows that some subtle changes have taken place within the industry.
1. There is an unreasonable profit margin in the industry, which leads to opportunities for low-priced competitors. Many low-priced competitors just see that the cost structure of the industry is unreasonable and the profits are artificially high, so they take low-priced ways to enter. For example, when Geely Automobile goes public, the gross profit of the ex-factory price is more than 50%. Geely saw the irrationality behind this high profit and quickly turned it into its own opportunity to enter the market.
2. The technology in the industry is highly standardized, and there is no confidentiality problem. The whole industry lacks technological innovation. When an industry cannot be promoted by continuous innovation, it may fall into the quagmire of price competition. At this time, there will be a large number of low-priced competitors, constantly challenging the price bottom line of the industry. Many industries in China have experienced such a painful stage.
3. The emergence of low-cost competitors is often the beginning of industry integration, and the emergence of low-cost competitors will greatly improve the speed of industry integration. The appearance of "price butcher" Galanz is a disaster for many home appliance enterprises, but it is undeniable that it has played a positive role in improving industry concentration, efficiency and competition level.
Weaknesses of low-cost competitors
Low-priced competitors often have a strong impact, but they are not invulnerable. There are insurmountable congenital defects under the strong appearance. Finding these "cover doors" is the beginning of defeating low-priced competitors.
Cover door 1: low price causes low-quality and low-grade image association. Although low price may not be low quality or low grade, in the eyes of consumers, it is easy to associate low price with low quality and low grade. This is a mindset of people, which is difficult to change. The first weakness of low-priced competitors is the limitation of their market image, which is hard to change once it is formed in the minds of consumers.
Door 2: Low-price competition needs a higher break-even point. The essence of low-price competition is to use scale effect to gain market share by lowering prices on the basis of reaching a certain scale. Therefore, low-priced competitors usually have high requirements on scale, and once they fail to reach the scale, they are in danger of losing money. This kind of competition model looks at the scenery-it sells a lot, but in fact it is very risky-and it loses if it is not careful.
Cover door 3: low-price competition often ignores innovation. Everyone has strengths and weaknesses. It is not excluded that some enterprises can do low-cost production and lead the innovation trend at the same time. However, most low-cost competitors tend to focus on how to maintain and constantly improve their low-cost business models, and it is difficult to spare no effort to make many innovations. Even if there is innovation, they will be more focused on how to better reduce costs. It is an objective law that an enterprise can only concentrate on building a certain aspect of competitiveness at one stage.
Cover door 4: slow strain rate. Except those enterprises with natural resources (such as cheaper labor and raw materials). ), low-cost competitors are more focused on reducing operating costs by continuously improving the supply chain. In order to do this, they have to solidify many processes to achieve higher execution efficiency, but at the same time, they will inevitably sacrifice some flexibility.
Four strategies to face low-cost competitors
First, redefine your opponent and yourself.
According to trout's statement in Positioning, all the purposes of marketing are actually carried out around consumers' cognition. The so-called positioning is to successfully let consumers put your products in a specific position in their minds as you wish. Competition with low-priced competitors is no exception, which is also the positioning war in consumers' minds.
Low-priced competitors are sometimes just a flash in the pan, because low-priced competition itself has great risks, but once they grow up and pass the most difficult market development period, they will become very terrible competitors. They will spread like weeds and occupy a large market. Therefore, once you meet such an opponent, you must be mentally prepared. If you can't eradicate them, the best way is to limit them to a certain market area, which not only refers to the geographical area, but also includes the consumption area. Specifically, we can start from the following aspects:
1, define competitors. No matter how your competitors advertise, there is a small tail exposed, that is, they can't explain the difference between low cost and low grade, unless the industry itself is supported by profiteering. Therefore, it is very logical for us to put them on the list of low-grade and low-quality products and let them toss in the low-price competition. There is no need for malicious attacks to define competitors. In fact, as long as you constantly strengthen your advantages according to the psychological formula in consumers' minds, you will put your competitors in the position you want. China's home appliances, cars and mobile phones all encountered such embarrassment at first, and international giants easily positioned these low-priced intruders as low-end products.
2. Redefine yourself. Many times it is difficult for you to define your opponent. For example, your opponent has established a fixed market image before you, and it may have successfully convinced the public that he is a cheap manufacturer or a manufacturer with certain characteristics. At this time, you have to operate on yourself. Redefining yourself is a painful process, but when you are attacked by low-cost competitors, redefining yourself becomes necessary and often timely. The development history of an enterprise is a history of constantly redefining itself, redefining the market and redefining competitors. When the IBM computer was attacked by low-priced computers from all over the world, IT adopted a strategy that no one expected, that is, re-examining its core values and re-examining its mission, thus redefining itself and the market, and finally realizing the overall transformation to an IT solution provider. The most dramatic scene was staged in front of the world, leaving those stunned opponents far behind.
Redefining yourself or a low-cost competitor is not a wonderful means to destroy competitors. Sometimes it looks slow, time-consuming and laborious. After this process, you may destroy your competitors, but it is more likely that your competitors live well in a low-cost space, while you live a nourishing life in your redefined market segment. But this win-win situation seems to be more conducive to the long-term development of an industry.
Second, the golden cicada sheds its shell.
Sometimes, redefining your opponent or yourself is not simple or enough. After all, a gorgeous turn like IBM requires extraordinary courage and great risks, so we need some other countermeasures.
In 2002, China Mobile had a good time, with 80% market share, which made it feel that it was the boss, but PHS, a low-priced competitor, made things a little fly in the ointment. Therefore, in 2003, China Mobile made a classic move, that is, it launched the "M-Zone", with the "M-Zone" as a symbol, providing a variety of fashion services at low prices, targeting at the young consumer groups aged 15-25 who advocate individuality, pursue fashion and keep up with the trend. A golden cicada successfully jumped out of the "quagmire" of price war.
From 65438 to 0999, the liquor market in China reached a historical peak, and the production and sales volume set in that year have never been surpassed. After the Shanxi fake wine case, the national macro-control pushed the industry into the trough of vicious competition. In order to seize the limited market share, manufacturers have reduced their prices. However, some enterprises do the opposite. In 2000, LU ZHOU LAO JIAO CO.,LTD introduced ultra-high-end wine cellars 1573, and Maotai raised prices for three consecutive years, while Wuliangye raised prices. Today, ten years later, it is they who become the top three in the industry.
Golden cicada is to get rid of the quagmire of price competition by various means and swim to the comfortable blue ocean.
Third, improve your business model.
The emergence of low-priced competitors is often a signal, which is the signal of the beginning of new industry integration. At this time, any enterprise should start to review its own operating mode. Some people compare low-cost attackers to terrible "viruses", and the best way to deal with viruses is to improve their own immune system. Sometimes defense is better than the best attack.
The smartest players are always good at learning from their opponents, making up for their own shortcomings, dispelling their fear and disdain for low-priced competitors, and learning from these attackers with an open mind.
Before Galanz succeeded, the home appliance market was a bit like the FMCG market. Everyone is crazy about advertising and building channels, but Galanz educates everyone and is committed to the ultimate manufacturing technology. This is the inspiration that a low-cost competitor brings to an industry.
Fourth, continuous innovation.
If you meet the challenge of low-cost competitors, don't slow down the pace of innovation because of constraints, because that is equivalent to giving up resistance.
Undoubtedly, low-priced competitors and differentiated competitors use two completely different business languages, and there is no absolute advantage or disadvantage between them. It depends on who plays better.
The classic feature of Apple computer is that it can achieve continuous success in the fully competitive electronic product market. There will never be a shortage of price killers in the electronic product market, and continuous price reduction has even become an industry law. Apple computer is using its innovative ability to constantly create markets and create demand without being attacked by those low-priced competitors.
summary
In any case, low-priced competitors just scratch the skin, which is enough to cause damage but not enough to cause subversion. Those innovative competitors are the real strong ones. They can not only subvert an enterprise, but even an industry. Low-priced competitors don't find new demands of consumers or create them. At best, they meet consumers' demands at a lower cost and make use of the human nature of being greedy for cheap to survive. But no matter how we evaluate low-priced competitors, it is impossible to completely eliminate them. As long as there is suitable soil, they will come back at any time.
Whenever this happens, you can only tell yourself in your heart that the good times are over. I can't help it This is the shopping center.