Cheap or Quality?

Rolls Royce, Bentley, Aston Martin, Ferrari, Lamborghini, Maserati, Gucci, Armani, Apple, Nike, British Airways.

Or

Trabant, Lada, Yugo, Dacia, George at Asda, F&F by Tesco, Alcatel, Ryan Air

I am not saying there is anything wrong with cheap I am just saying that in my experience there are few if any businesses out there that are both market leading and cheap.

Even massive businesses with billion-dollar marketing budgets can’t pull that off so why is it that so many that I meet think they can?

If that is true in the businesses above surly you should want that to be true in personal or professional, services right? Do you want a great Doctor or a cheap one? Do you want a great Accountant that saves you money or a cheap one that costs you money?

I know If I am paying for the services of a Dentist I want the best I can find, if I was looking for a Senior manager of any description I would want the best I could afford.

Competing on price is usually referred to as a cost leadership strategy. Cost leadership strategies are really only viable for large companies who can enjoy the economies of scale with large production volumes or buying power and a large market share. Small businesses can be cost focused if they can enjoy some advantages that help with lower costs for example being below the VAT threshold allows a 20% reduction in costs yet limits growth but they are rarely cost leaders, likewise a small local restaurant in a low rent location can attract price sensitive customers and compete if they turn tables quickly enough and pay minimum wage.

Listen I am not saying you can’t try to do this, you can offer great value and a great product at the same time the problems start when you try to market that you are doing this.

Imagine what you would think seeing a headline that read

“Rolls Royce Quality at Dacia Prices”

I imagine you wouldn’t believe it, because in your heart you know it’s not true and in your heart, you know that you can’t do it and grow your business for any length of time either.

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