Options To Beat Your Low-cost Rivals

Adrian Ryans wrote in the McKinsey Quarterly an interesting article on what you can do when you underestimate a low-cost rival. Hans Lodder discusses your options to beat your low-cost rivals.

Suppose your company has a comfortable position in a market. It is positioned with the delivery of premium products and/or services. then, on a bad day (of course!) a new form of competition comes on the market. This newcomer wants his share of your market, and delivers a low-cost variant.

In the beginning you do not even notice anything, because you are focused on your traditional competition. But soon, you will see differences.

This newcomer delivers his goods or services at a lower price. it can do this, because it has lower service levels. You will say: definitely a lower quality and a lower performance. my loyal customers will neglect this.

But then the bad news. Your customers will demonstrate a new behavior. They will use the new way of performing business, and they will get used to the new service levels.

this is the moments when things start to hurt. Good advice is expensive. What are you going to do? I think you have 3 options:

1. Neglect the new competitor and do nothing.
2. Introduce a new product or service, which matches the lower quality and performance of the new competitor.
3. Move up the value chain, and start servicing a better solution.

I would not neglect the new competitor, because that means that you will be pushed out of business. Also, I would not try to match the new competitor. You are delivering a premium product or service. If you change that, it will cost the market a long time to take you seriously. If you ever can. This seems to be a very nice way to be pushed out of business.

In my opinion your only valid option is to move up the value chain. In my blog on Quality Is King! I presented an methodological approach. an example for Health Care you find in Service-line Strategies For Hospitals and Other Service Providers.

What about you? How do you beat a low-cost competitor? Hans Lodder can help you to analyze your options to beat your competition!