Even In Recession – The Key Elements of a Good Strategy

Three Keys to The Lowering Price Strategy
If the Chanels, Versaces, and Chloes of the world really feel compelled to lower prices as a response to the economic downturn, they need to incorporate three elements into their strategy. First, they need to focus on the lower price customers who have “traded down” to target critical masses of strategic consumer groups which have shifted their behaviors away from higher price points. Secondly, they must diverge from groups completely out of the lowered price range. Avoid wasting effort targeting groups buying at substantial lower price points, and ultra-premium buyers purchasing items above their products’ offerings. As mentioned before, it is advantageous to differentiate the product features when lowering the price. Lastly, to capitalize and leverage the brand – which is critical for luxury items – develop a unique new tagline.

Use A Functional Orientation Shift To Differentiate Your Product
A great way to differentiate a product when lowering costs is to use the Blue Ocean Strategy of more functional orientation in less important features of the product or brand. Do not reduce the features and benefits for which customers have strong emotional ties or reactions. This a slight variation of Mike Bolden’s “selective feature reduction” strategy in which less important items are chosen to take costs out along with the elimination of unimportant extras. Although the lower-priced item is differentiated, it’s still associated with the brand, so it is key to determine the right price point “prestige threshold” level. To gauge this point, observe and access:
1. Competitors in the same marketspace
2. Competitors above and below your product/brand’s marketspace
3. Range of spending for like items by your customer base

Downward Shift To A Different Marketspace
In lowering the price point for a luxury-goods item, it is critical for a manufacturer to avoid shifting its market position in the price-performance vertically “straight south” without differentiating the product, and moving laterally “left” or “right.” By shifting downward to the left by reducing or changing product features or to the right by adding or altering features, a goods-maker is entering a different marketspace, and the Blue Ocean strategy means the water’s fine!