Lowering prices usually means more average and less engaging products. And selling less for less is rarely a strategy for growth. But here’s a paraphrased lesson on positioning from the The Big Moo:
“Steve Jobs had a problem. His iPod was dominating the market, but was threatened by cheaper music players—players with far fewer features but much lower prices… A Flash MP3 player uses a computer memory chip instead of a hard drive—so it’s cheaper to make, but holds less music. Every day, more consumers were making a compromise and opting for the cheaper alternative. Apple could have launched its own Flash player in response, but everything about it would have been a compromise in order to offer a lower price. A smaller, cheaper screen. A flimsier, cheaper body. A smaller, cheaper capacity.
ING Direct uses the same strategy as Apple but in a very different business: banking. In three years, they’ve signed up more than a million new customers for their bank, largely based on what they don’t do. They don’t offer checking, they don’t have ATMs, and they don’t handle cash. They have no minimums and no fees. They don’t have branches or tellers, either… Instead, ING Direct puts the money they save into two things: 1. actual human beings who will talk to you instead of requiring you to go through a computer 2. higher interest rates ING doesn’t compromise in order to pay higher rates. They don’t choose to give slightly less service, or to have people wait a little longer on hold… Instead, they invented a bank where giving people less is actually better.”
Less Can Be More. The key is to capitalize on what your audience really wants and deliver just that.
The Big Moo: Stop Trying to Be Perfect and Start Being Remarkable is a book by Seth Godin and The Group of 33. It’s truly a great read. Check it out.