Every Company Needs a Good Map

In the October 3, 2007 Wall Street Journal article (may require subscription): "Wal-Mart Era Wanes Amid Big Shifts in Retail", Gary McWilliams says that the companies who compete with the retailing giant have found ways to beat their low prices:

Rival retailers lured Americans away from Wal-Mart's low-price promise by offering greater convenience, more selection, higher quality, or better service. Amid the country's growing affluence, Wal-Mart has struggled to overhaul its down-market, politically incorrect image while other discounters pitched themselves as more upscale and more palatable alternatives.

What an interesting set of "positions" to take.

1. higher quality could also be termed: Superior Quality
2. convenience, selection, and better service are all forms of Best Service
3. upscale is often Cool
4. upscale can also be High Tech

Add the Low Price position of Wal-Mart and there is the 5-Fold Way!

When I first came up with the 5-Fold Way I was a bit concerned that I was getting ahead of my business understanding abilities. However, since that time 3 years ago, I have seen repeated examples that confirmed my observation. As a trained biologist, I often relied on repeated observations to confirm a hypothesis.

How can you put this to work for you... 

First and foremost, determine which of these positions you can adequately address. The next step is to review your current customer preferences. Why do they buy from you? What is the most important factor in their purchase decision: price, service, quality, features, or image? Keep in mind that there will be some component of each. You cannot completely ignore any one of these factors.

While every company would like to be Cool, it is not always possible. Public opinion has a lot to do with that decision. Still, design, functions, and audience approach can go a long way toward successfully launching a Cool product.

Low price is not an easy position to maintain. Many small companies get caught trying to build a business on margins that cannot deliver sufficient cash flow to operate on. When a new technology lowers the cost of production is usually the only time a new company can beat an established company on price. 

If you have a new, or high technology, that provides new functions or advanced features this is the time to pursue a higher price. Usually there are development costs to be recovered, which will be difficult to recover once competing products push margins down. In addition there will be costs for future improvements to keep a leadership position in this area (See yesterday's post on Verizon).

Service and Quality are the easiest areas for a small or new company to approach. They require more attention and involvement but often require less upfront cash. This is where the late nights, the direct connection with customers, and the elbow grease payoff. 

Of course, these are just brief comments which serve to begin the conversation. If you have observations on how a company can successfully apply the 5-Fold Way, in business, life, or online, please share them.