In overcrowded industries, differentiating brands and products becomes much harder. Products are generally becoming more similar and as they do, customers increasingly select based on price. This often results in increased price wars and shrinking profit margins. With that in mind, are price wars inevitable? In most cases price wars can be avoided by revisiting your product strategy and asking yourself the following questions:
Have you tried placing your product in an alternative industry?
Look across alternative industries. Most products and industries are not in a silo. Therefore, your product might be better positioned to compete in an industry that produces alternative products.
Do you need to partner with someone to create a great solution?
Can you define your customer’s needs, and can your product meet all their requirements? There might be an opportunity to partner with a service provider which would compliment your product. Most service companies would be happy to sell a product on your behalf if it adds value to their service offering.
Is your product over-designed?
If your product is over-designed, it’s because you are in the race to match and beat the competition. You don’t have to be all things to all people, so focus on core value features and eliminate features which confuse your customers, or even worse, detract from your core value proposition.
Do you need to rethink your Value proposition?
Is your value proposition still relevant today? For example, Products/Devices with USB-3 connections are still applicable today but are quickly losing their value with the ever-growing popularity of USB-C.
Do you have a great Tagline?
A great tagline is memorable and links a product to an activity or emotion. “Just do it” (Nike), “Because I’m worth it” (L’oreal), “Think Different” (Apple), and “The Ultimate Driving Machine” (BMW) are some great examples. Also, Dollar Shave Club has a great tagline “Shave Time. Shave Money.”, so you don’t have to be a Fortune 500 company to brainstorm a great tagline.
Have you stopped innovating?
Innovation can create new industries, but even minor innovations or improvements will over time set you apart. For example, finding a way to reduce your shipping time by 10% – all of a sudden making your product shipping the quickest in the industry; so keep innovating and improving.
Are you obsessing over your competition?
Don’t spend too many resources focusing on what your competition is doing. Doing so usually results in similar product strategy, value proposition, and pricing. You will not stand apart with a “Me-too” strategy and approach. Your primary goal is to look for ways to differentiate yourself.
Your ability to win a price war is directly linked to your ability to operate on razor-thin profit margins. Unsurprisingly big brands and large companies often win price wars, so it can be a sound strategy for them. For everyone else, entering into a price war should be the last resort. Therefore, we recommend focusing on the alternative product strategies we outlined above.