By now, we’re all aware of the slash-your-prices scenario many companies take as a given these days: Your customers demand more and have online access to product comparisons from multiple sellers; you face global competition from rivals that have labor-cost advantages; and the financial crisis has accelerated the commoditization of more and more markets.
The solution? Cut your prices to gain volume and scale.
That definitely works for a few companies. But the reality is a very few — think Wal-Mart or Costco or Southwest Airlines. In fact, the very success of these business models makes it difficult for their competitors to duplicate — think Kmart or Sears, or any number of bankrupt budget airlines.
This article is for everybody else: those who choose not to compete on the basis of cost and low price. This article is for companies that can and should compete on the basis of performance, for which their customers willingly pay higher prices.
To read the rest of this story please go to: MIT Sloan Management Review
