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4 ways to exit the price war.

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Ways to exit the price war

Most companies in a bid to retain their market or gain more, price becomes an arsenal. They find every strategy to lower price. As soon as they make the move, their competitors follow suite and the cycle continues until one eventually keeps a low price that they barely can keep up to their over head cost despite reduced cost of production, cheap labour or workers retrenchment. This is what price war can do to an organization. Ways to exit the price war is your strongest weaponry not the price arsenal.

 

This price way is virtually seen in every industries with every company trying to make their products most affordable. What you need is not to win the price war but to exit the price war and leave the way for the mini companies. Here are 4 ways to exit the price war.

1. Build a brand:

People always have a reason for buying a product. Some buy for the luxury and some buy out of emotions. Build your brand around those reasons. Apple no doubt is the king of brands. Having built a trusted and reputable brand, have a high pricing to the products. They are off the price war. This is what having a reputable brand can help you enjoy.

Related: How Apple built their brand

2. Build Trust:

Trust is beyond having integrity and doing what you said you will do. Trust is a matter of competence and showing great track records of great delivery in your services. When you gain trust in the market, increase in price would go along way to differentiate you from other businesses.
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Related: 4 essential pillars to gaining trust in business

3. Increase value:

value addition is a great way to stay off the price war. When you offer value like no other one, increase in price becomes a reward. Add more value to your product if you must increase the price. People can tell the difference between cost and value. let the cost of your product not just be in the price but in the cost of not using the product. Add so much value that customers begin to see what it will cost them for not using it, only then would they pay a high price to have it

4. Increase price:

Staying off the price war is the goal. This would involve you differentiating your product, use of incentive and testing your market. Check my article on how to raise price and still win the market. If this is achieved, you always can enjoy a price increase and still win big in the market.
Related: How to gain competitive advantage.

 

A case study of the current ongoing events in Telecom industry in Nigeria. The competition had always been on price reduction, Nigeria Communication Commission (NCC) interfered to bring about a regulations in pricing which obviously didn’t help. It wasn’t long one of the players couldn’t cope up and had to hand over. One of the player hinges on “quantity and cheaper” data for surfing the internet while another hinges on “quality and readily available” data and call bonuses with obviously a high price. What’s the point, while the price war was ongoing which brought to an end to one of the players. Another player focused on increased price but quality services.

 

In conclusion, pricing is not the only competitive tool to use in the fight for gaining market share. There are other strategies aside price like value addition and 6 more. Read the article on how to increase price and still win the market to find out more and also the article on how to gain a competitive advantage

 

Share your opinion in the comment box and let us here your testimony when you’ve applied these strategies. Success!

Favour Emeli is passionate to see businesses grow and yield increasing profit. He consults for business and has helped some secure grants and funding. He is the Author of 365days Business Devotional For Entrepreneurs

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Business strategies

Competitor Analysis: All you need (+ How to Start Guide)

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How do you see competitors in your industry? Do you see them as a threat, a motivation, or an information bank to learn from? Hopefully, important competitor analysis tools provided in this post will help you in using your competitors to serve your customers better.

WHAT IS COMPETITOR ANALYSIS

Competitor analysis is a way companies in an industry get to see the full picture, which is the strength and weakness, of their current and potential competitors. So, it helps companies realize opportunities and strike decisively against their competitors. Clearly it is handy to every business no matter the size or the stage. That is small business owners, big business co-operations, and start-ups.

TYPES OF COMPETITOR ANALYSIS FRAMEWORK

There are different types of competitor analysis framework which you can use for effective competitor analysis in your marketing strategy. And these frameworks have their differences and individual peculiarities that make them more effective in different marketing conditions. Let’s look at them and know when best to apply them.

  1. SWOT analysis:

    SWOT stands for Strength, Weakness, Opportunities, and Threats. It’s a popular and easy framework used by firms to analyze internal and external factors that can affect their business. The internal factors being strengths and weaknesses and the external factors being threats and opportunities. The constituents of each component of SWOT analysis are organized based on hierarchy by companies. So, SWOT analysis of a company will look like the image below.

  2. Porter’s five forces:

    This type of competitor analysis framework has five components as summarized below.

    1. Level of competition within the industry:

      There can be an inverse relationship between the number and strength of your competitors to your market relevance. Your power to influence the market can diminish when you have more competitors with a better product than yours.

    2. Supplier power:

      If you have suppliers above you in your industry. How easy can they increase the prices of their supply? Clearly, the more the number of suppliers with quality products the more your alternatives. So, this could force them to cut down prices to attract customers.

    3. Buyer power:

      How much will it cost buyers to influence your price in the market? Obviously, if you have a large customer base whom you provide with an affordable quality product better than that of other rivals. It will be quite difficult for customers to dictate terms for you.

    4. The threat of substitution:

      If there are lots of options for your customers to choose from then they will likely choose the cost-efficient ones. For example, if they could DIY your products. Then they are likely to cut you out. So, you have to constantly strive to make your product among the few options available to them.

    5. The threat of new entrant:

      The cheaper, in cost and time, it is for new competitors to enter a market the easier they can become a formidable competitor and weaken your hold of the market share.

  3. Strategic Group analysis:

    By applying this type of framework. You will be able to group companies within your industry based on their strategy in the market. Know the ones that possess more threat to you in the industry and how to deal with them. Then know the ones that are less threatening and keep an eye on them.

  4. Growth share matrix:

    The growth-share matrix categorizes products based on their growth potential and market share. They are the cash cows, the dogs, the question mark, and the cows. Hence you can use this tool to know the stand of a competitor’s product in the market and how to rival it.

READ ALSO: MARKETING STRATEGIES FOR E-COMMERCE BUSINESS

COMPETITOR ANALYSIS TOOLS

Let’s check out some examples of important competitor analysis tools that will help you gather and analyze data of competitors in your industry. We’ve categorized them based on these 4 areas of specialization.

  1. Competitor analysis tools for social media:

    These tools enable companies to monitor their competitor’s social media presence. Examples are Sprout social, Phlanx, Social blade.

  2. Competitor analysis tools for SEO:

    Helps sites to discover keywords that drove the most traffic to the competitor’s site. And more than providing trending keywords they also provide data on SEO  attributes like backlinks, organic, and paid searches. Examples are SEMrush, Ahrefs.

  3. Competitor analysis tools for content:

    They help businesses in the analysis of a rival’s content. So, this could help them learn and make adjustments to their subsequent contents. Examples of the tools are Buzzsumo, Similarweb.

  4. Competitor analysis tools for ads, emails:

    Tools like isPionage help businesses monitor a rival’s paid ads. It helps in the analysis of multiple aspects of pay per click campaigns. Also, email analysis tools like Milecharts and Owletter are handy when businesses want to dig into their rival’s Email marketing.

HOW TO DO COMPETITOR ANALYSIS

So, you now have an idea of competitor analysis is all about. Now let’s guide you on an easy to use steps for your competitor analysis.

  1. Discover and categorize your competitors:

    This is the very first thing to do in competitor analysis. It involves you finding out your competitors and classifying them based on the type of competitor they are to you. A simple google search of keywords in your industry could help you with these. Other tools like SEMrush and Similar web will also automatically list your competitor’s websites when you enter your own website in the search field. Then, when you are done identifying; categorize them based on the type of competitor they are.

      • Direct competitor

        Provides similar products to solve the same problem for the same consumer base.

      • Different solution competitors

        Provides similar products to the same customer base but using a different technique.

      • Different customer competitors

        Solves the same problem with a similar product but to a different customer base.

    For a detailed and thorough analysis, it is advisable to get at least one competitor for each of the categories.

  2. Company information:

    When you have discovered your competitors. Then, it’s time to do some digging on some information about them. This information includes

      • the company’s overview like the number of employees

      • their funding and estimated revenue and

      • customer base features.

    You can get information on the company’s overview on their website or social media platforms. And for their funding and estimated revenue, you can dig something up from their media interviews and conference presentations.

  3. Product information:

    You need to know everything about the product your company provides. For example, product features, pricing, and customer benefits. If they have an e-commerce platform check it out to get product information.

  4. Customers’ details and reviews:

    Customers’ detail like their geography helps you know your competitor’s target location. Their reviews let you know their sentiment. Tools like Awario and Mention will be handy to gather information about your competitor’s customers.

  5. Marketing:

    The information you should gather here is as follows.
    SEO, social media presence, influencers and partners, content marketing, Advertisement. The competitor analysis tools will help you out with these.

  6. Use the appropriate competitor analysis framework:

    Feed your garnered intel to the most suitable type of competitor analysis framework. Know the strengths and weaknesses of your rivals. Then act based on the result of your analysis.

    READ ALSO: HOW TO GAIN COMPETITIVE ADVANTAGE

IMPORTANCE OF COMPETITOR ANALYSIS

If you call it espionage. Fine. If you calling it an intrusion of privacy. No comment. But it’s apparent that competitor analysis is important to businesses. And some of these importance are as follows

  1. Identification of threats and opportunities:

    This is the major importance of every competitor analysis. So, you recognize the strengths and weaknesses of your competitors after analyzing them. Hence, these strengths serve as a threat to you, so you need to adjust well, and the weaknesses an opportunity for you to strike at.

  2. Increase market share:

    If you are far low in ranking in your industry. Then, this is the long-run importance of competitor analysis. Realizing your customer’s taste from a competitor and fine-tuning it will have an impact on your market share.

  3. Proper channeling of resources:

    You don’t get to waste resources on low yield products or marketing strategy after conducting a comprehensive competitor analysis.

  4. Increased sales:

    When you have a sizeable market share; your sales increase. Hence, this is another importance of competitor analysis.

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Business strategies

Ansoff Matrix Explained: Practical Examples, Theory, & Strategy

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Ansoff Matrix

You are probably trying to get your head around some questions like “what Ansoff matrix is,” “Ansoff matrix theory,” “Ansoff matrix examples,” “Ansoff matrix strategy.” Well, you’re at the right place cos this post has been designed to clarify all the questions you have in mind on this subject.

What is Ansoff Matrix

The Ansoff Matrix theory was developed by Russian-American mathematician and business manager Igor Ansoff. It’s a framework that’s designed to help firms decide their market growth as well as product growth strategies. Clearly this tool is not just handy to big business but also to small businesses and start-ups. Because a big business might want to diversify its products but a start-up might just want to penetrate the market. Having this knowledge, let’s take a look at the breakdown of these strategies.

Breakdown of the Ansoff Matrix Strategy

There are 4 quadrants in the matrix, and as a company you can choose from any of the quadrants, the strategy that maximizes your market potential. So, let’s breakdown this Ansoff Matrix Strategy by taking a look at all the components of the framework. The picture below gives a nice summary of the strategies.

Ansoff Matrix

  1. Market penetration in Ansoff matrix:

    This is the least risky in the Ansoff Matrix strategy. It focuses on getting more out of an existing product in an existing market. So, a company tries to sell more of its products in its present market through any of these. Increase in advertisement and distribution support, reduction in price, acquisition of a rival. One prerequisite for this is having a small market share. So, you try to get more hold of the market through this strategy. But if you already have a sizeable chunk of the market, then you may want to select any of the other three.

  2. Product development in Ansoff matrix:

    In this strategy the firm creates more products in it’s existing market to satisfy consumer needs. In this you already have a customer base for a certain product but the product has attained a level of market saturation. So, to solve this you offer consumers another product within the same market. The new product can be actualized by patent acquisition to produce someone else’s product, badging a bought product as your brand, investment in research and development of additional product.

  3. Market development:

    By applying this Ansoff matrix strategy a firm aims at reaching out to a new market segment with their existing products which has gained market penetration in another market segment. For instance, some companies after gaining national market penetration in a given country, they move forward to reach out to consumers in other countries where they’ve not been established. You can actualize this in a local business by moving your product which has gained market penetration in a state/province to other states. However, it’s advisable not to take up this strategy until your products have penetrated at least one market.

  4. Diversification:

    When companies adopt this Ansoff matrix strategy they introduce new products to a new market. Because the company is investing in both a new market and a new product this causes a two quadrant move in the Ansoff matrix. So, this makes this strategy the riskiest. Diversification strategy could be related or unrelated. In related diversification there is relationship and hence potential synergy between the firms. In un-related there is no relationship between the firms. So, un-related diversification can also be called conglomerate growth.

Hence, you can select any of these strategies depending on your position in the market.

READ ALSO: 7 STRATEGIES TO POSITIONING YOUR BUSINESS IN 2020 [WITH CASE STUDY]

Some Ansoff Matrix examples in reality

We are going to list the different Ansoff Matrix examples in reality based on the component of the quadrant they best fit in.

Market penetration

Android is a good example of this. Apple and blackberry dominated the U.S smartphone industry about 12 years ago. But today Android shares almost equal amount of the market with Apple and we can’t find blackberry nowhere.

Product development

Smartphone companies like Apple and Samsung putting out new phone models every few years is an example of product development in the Ansoff Matrix.

Market development

A good example of market development strategy is PayPal. They initially started their service in the US and expanded to other countries. Another example is Apple, after releasing iPod which is an expensive device for music lovers. They released iPod shuffle which is cheaper and targets a market segment of consumers who love music but are less willing to pay a premium price for it.

Diversification

Alphabet incorporation exemplifies this. They started on the internet with google search but gradually moved into different markets, including the oil sector.

READ ALSO: FAST FOLLOWER STRATEGY: [DETAILED CASE STUDY]

Finally, the Ansoff matrix is good for startups, small business owners and big business owners. So, you need to know you position in the market and select the strategy that will work best for you.

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Mistakes you Should Avoid as a Start-up Entrepreneur.

Building a successful business─ whether it be online business or an offline investment─ demands so much discipline, extreme caution and proper risk management analysis.

You must have this at the back of your mind: every business is a risky venture, and to maximize profit, you must control your risk probabilities and minimize every possible cost.

In this article, I will be sharing what I may tag my life experience in business and how you can leverage on them when building your own business, and mistakes you should avoid as a start-up entrepreneur.

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entrepreneur-start-up-mistake

Building a successful business whether online business or offline demands discipline, caution and risk management analysis.

You must have this at the back of your mind: every business is a risky venture, and to maximize profit, you must control your risk probabilities and minimize every possible cost.

In this article, I will be sharing what I may tag my life experience in business and how you can leverage on them when building your own business, and mistakes you should avoid as a start-up entrepreneur.

Being new to the business, you may be tempted to believe everything: from what you heard from your supplier to what your friends/families must have assured you about the business.

But in the business world, there is nothing like promise or trust, instead what you have is terms and conditions, and profit and loss.

When you carry out your business on trust, you stand a higher risk of losing both your money and whatever relationship you share with your client.

For every Cheque, transaction, and monetary expenses, please have a written agreement of your terms, conditions, and legal implications of such transactions. It is always safer to protect and preserve your business with a written agreement than to exchange words and curse your client for a trust-based business gone wrong.

This is the first entrepreneur start-up mistake to avoid.

  • 2. Never Run your Business without Proper Documentation.

This is the second entrepreneur start-up mistake on our list.

You will always have brilliant business ideas, and wonderful business inspiration, but the very moment you want to turn such ideas into a business where people can patronize your services or products, please, by all means, have a well-documented business portfolio for your business.

This document shall contain every legal validation that makes your business legitimate in your region; the services that you provide; and the privacy policy of your business.

If you do not want the government to pull down your sweat or for you to lose your millions in a legal lawsuit with your client, then you must by all means have all the necessary documents and approval before starting your business.

  • 3. Never Run your Business on Credit.

Every start-up business will always face the challenge of trying to win customers and make a profit. Sometimes some business owners will sell their products to friends, relatives, and families hoping that they will pay later or that they will win their patronage.

The reality is that it takes more to recover money than it will take you to put the right policy in your business. We all need customers/clients but nobody needs debtors in their business, so if any of your clients can’t pay for your product or service, then do not sell to the individual.

Tons of businesses have shut down as a result of debtors who never paid for the service or product they got or used. You may wish to take this point seriously.

This is another entrepreneur start-up mistake to avoid.

  • 4. Never pump-in all your capital at the start of your business.

Apparently you heard that business A is profitable and boom you invested everything in the business so that you can make maximum profit. Well, I have some bad news for you; this is exactly how many investors became bankrupt for life. Don’t become a victim of this entrepreneur’s start-up mistake.

Every business has stages─ spudding phase, consolidation phase, and the expansion phase ─ and you must monitor your growth indices and take adequate risk measures before determining whether to invest more or to maintain what is currently in existence.

Why do I suggest that you do not invest all your funds in a particular business? The answer is simple, every business is dynamic, and your predictions today may be right for one month but may fail after two months of operation.

The best alternative would be to invest 25% of your capital, then increase the capital only when you have strong and positive profit indicators.

  • 5. Never run your business with incompetent hands.

Business is a fierce battle, battle against loss, failure, competitors, government policies, and forces of demand and supply. And no matter how wonderful your business ideas might be, there is someone somewhere plotting something better to take your clients or improve on your services at a reduced rate.

Anyone who entrusts their business to someone who is not competent; someone who is not committed to the business; or someone who has a poor customer relationship, is most definitely joking with his or her business.

Business doesn’t respect any degree or faith but principles of wealth creation. If you joke with your business, you will lose your clients, funds, and your integrity as an individual.

Read Also: 500+ Business Plans

Conclusion

This topic entrepreneur start-up mistake is vast, but I shall continue to share tips that I believe will guide you as you navigate through the rough path of setting up your own business.

I must congratulate you for your bravery and courage to tow through this path, and I can guarantee to you that you will smile someday in the future.

Always remember, the economy belongs to entrepreneurs; and the world awaits your business ideas.

Till I write to you again, keep checking this space for business tips.

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