How to Choose Business Level Strategies that Actually Work

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It’s hard to gain that competitive edge and stand out in a saturated market. These are the issues at hand for an independent business. So how does a business gain customers and ensure consistent revenue generation? Some of the answers to this question lie in the type of business level strategy they use. And it’s generally agreed that there are three major types of business strategies. The way to pick the right strategy for your business is to know your end goal. Here are the questions to consider as you decide the strategy that works the best for you and your business.

1. Cost Leadership

Simply put, cost leadership is all about reducing the price of goods to gain a competitive edge. Consumers are a lot more savvy shoppers than ever now. There are dozens of ways to know about a product before you ever see it in person. Online resellers can reduce the cost of items and make it challenging for companies to gain a competitive edge. And a cost leadership approach is all about creating competitive pricing in a market. The goal in cost leadership is to as much as possible reduce the cost of production while at the same time offering a quality product that is comparative to their competitor.

If a given consumer cannot increase his or her income bracket, then he or she wants to be able to buy more at a lower price. The perfect example of a cost leadership model done well is Walmart. Walmart’s aim is to pull in the largest amount of consumers and keep the prices lower than any of their competitors. Walmart reps are able to do this by meeting with their product vendors and finding out where that vendor could cut its costs. Both Walmart and the vendor win in this model, and this is how Walmart has succeeded so well in the cost leadership business level approach.

2. Differentiation

There are certainly different types of business level strategy. Cost -or rather low cost- leadership is not the only business strategy. All businesses or brands want to stand out from the crowd. Some choose simply to do that my aiming to have the lowest cost in the market. But another approach is to make your business stand out, or differentiate itself in the market. This can be done by offering unique services or benefits or by aiming its branding and marketing at the usefulness of a product. It could mean appealing to a moral compass or contentious shopper who wants the products he or she uses to align with a belief system. It’s an approach that really knows its clientele or ideal consumer. Differentiation is not just about offering the very lowest cost. On the contrary, it can mean a higher price point but with a value added feature that will appeal to its ideal shopper. This might mean locally-sourced materials or organic ingredients or a tool for users and buyers that is intuitive and relevant to a particular market.

For successful differentiation, a firm or business really needs to know its target market. What do customers really want out of a product? What are their distinct preferences? If a firm has the answer to these questions, it can price the product on the higher end because the marketing is catered exactly to that demographic.

3. Focus

Harvard University Professor, Michael Porter laid out another general type of business strategy that is similar in nature to differentiation and that is a focus business strategy. There are various benefits to using a focused approach to building business. It’s an approach that can strengthen and build relationships between business and consumer. In this approach, a business or brand needs employees who are well-trained at listening to a potential consumer’s needs and values. The products or services are then built around all that feedback with the aim of gaining the trust and business or that particular demographic. A consumer then feels that a brand identifies with his or her needs and there is a strong emotional loyalty as well as an economic one. The consumer in this approach feels that a product or service has been designed specifically with them in mind.

All of this takes time and focused energy by a company. But if they succeed in truly knowing and meeting the needs of a focused group, then they will have a loyal consumer base. This is turn gives the business the leverage to raise their prices. A loyal base of consumers will likely pay a higher price because they feel that the company has been there for them. Companies that are able to win people to their “cause” are often referred to as “Power Brands” because they do more than making a product. People are deeply loyal to them as something more like a cause.

Typically, when people have what they view as a need that must be met, they want only the best. An ambitious climber who has his or her sights set on a summiting a famous peak, wants the gear he or she brings to be the best. This is how a company like The North Face has gained such devoted consumers. A company of that stature has a strong product knowledge and it brings this to the design and production. Without that strong product knowledge a company cannot succeed in gaining or keeping the loyalty from a focus group.

Every business strategy can be successful with the right leadership team implementing it. Cost leadership is all about driving down prices with mass production. While differentiation and the focus approach are about gaining an edge in the market through careful research about a niche group. But no matter what, knowing your end goal will help you decide what business approach works the best for you. Choosing the right business strategy could be the opening chapter in the success story of a business or a brand. Therefore, it is always recommended to focus primarily on a business strategy to give your product a great chance to outshine the competitors.

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