Tuesday, October 10, 2006

Cheaper = Red Ocean Strategy

Seth Godin points to an angry note from a reader who was upset when she asked him to help persuade her bosses that the best way to grow their resort was to lower the prices, and he responded that she might better raise her prices and create a remarkable experience.

Seth's view from a marketing perspective: Cheaper is the last refuge of the person who is not a good marketer.

My view from a business strategy perspective: Cheaper, by itself, is admitting that you are competing in a commoditized market; Cheaper says that you are willing to accept smaller and smaller margins; Cheaper says that your customers only care about cost. Cheaper says that you want stay in a red ocean, and admitting that you have no vision to create a blue ocean strategy for your company.

Cheaper can be part of a disruptive business model and strategy if it is a component of an overall customer value proposition that is often combined with 'better' and 'faster'. If you find yourself thinking about the cheaper strategy, its time to re-invent your business or move on.

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