Walmart's () success is the stuff of legend, but there is no mystique at the core of its mammoth success. The energy and flow of getting regular sales (receiving money) feels great and attracts more business – this was one of the surprising things I noticed after publishing my first book. This includes tangible elements such as functionality and intangible elements such as the friendliness of service or tactile feel of a steering wheel. (Here, "quality" might not mean low product quality. Low generic-drug prices exacerbate drug shortages: FDA. What company wouldn’t want to attribute its profits to the quality product it produces? Take bamboo for example: it is cheaper than other exotic woods, but it is resistant to wear and very stylish. That’s a fairly rational approach. What we’re seeing in the vodka market is that high price does not necessarily mean high quality, and low price doesn’t necessarily mean low quality. By learning to compete in the extremely cost-sensitive Chinese environment, they have reached a level of superiority in designing and producing goods that sell at a low price”. For example, Safeway claims “Check out our brands! A forthcoming study in the Journal of Consumer Research tries to get to the heart of the issue, exploring what is described as “naïve theory.” Basically, because consumers can’t know everything about a product, we fill in the gaps with our own (naïve) theories to help us make decisions about whether the cheaply priced product is a terrific deal or a piece of junk. For high-end western firms the only way to react is to constantly innovate and find creative ways to increase the quality of their offerings in ways that their competitors can not replicate (breakthrough designs, very responsive and mass customizing variety strategies, etc.) “But that is a game they cannot win, and if they try to play it, their days are then numbered,” Kouvelis stated. More information on the this topic can be found here: 6 Myths About Pricing You Need to Debunk. From high quality to low! Second, your profit margins won’t be enough; even if you make 10 sales per week, your profit will be insignificant. Example 2 (c): Value Vs Price This can be explained easily with the popular example given by Prof. Adam Smith about water and diamond. No one wants to buy the Wal-mart version of legal services, plumbing, or safety equipment. Low pricing businesses are often the ones that also tend to produce large quantities. All rights reserved. Alex Kacik ... One of the latest examples is the shortage of vincristine, ... low quality has been allowed to become acceptable. They sound great, but they provide nothing of value to the consumer and won’t build great companies. The current dynamics favor Chinese manufacturers and their low-end entry market strategies, the researcher said, but that does not mean there is no hope for U.S. firms. What Does Quality Cost Mean? The debate over low cost vs. high quality and high output is one university experts, allied industry and seedstock producers have been waging for as long as I can remember. “They have new and efficient factories, an abundance of cheap labor and a willingness to use cutting-edge, lean management approaches in their facilities,” Kouvelis said. The answer might be: the company that competes on price. Advertising Appeal, Internal Reference Price, Quality Perception, Price -Quality Inference 1. Avoiding the "low-price, low-quality" perception Of course, the price of a product doesn't always reflect its quality. You need to consider your needs carefully in order to get ‘more bang for your buck.’ When the time comes for reselling, a good value for the price will guarantee a better return on investment than expensive products.”, (MORE: Apocalypse Marketing: Top 10 Products & Services for the End of the World). For example, … with 2 examples: ... • Minimize expensive, low-quality, ... you can expect that your Cost of Quality will be between 20% and 35% of the revenue stream or the product’s selling price. If you always got what you paid for, then “cheap premium” would be an oxymoron. Pricing does not need to be high for higher positioning. “By creating those differences, Harley Davidson thus paved the way for a highly differentiated sustainable competitive advantage. The company also branded their bikes in a way that created mystique around the product and the buying experience. This position is not very competitive within the Bowman Strategy Clock. ... Companies, even the well-managed ones, lost half or more of their market capitalization in few months. c : contemptible because of lack of any fine, lofty, or redeeming qualities feeling cheap I felt cheap, full of shame and guilt. At higher prices, small changes in price correspond to smaller changes in quality. 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