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SELF TEST #15: Identifying High Potential Price Points

Test #1:

Define Standard Leader products and companies.

Answer:

A Standard Leader is a competitor, or one of several competitors, or product that sets the standard for performance and price in an industry. More than half of a Standard Leader's unit volume is sold at the most common product price point in the market.

Test #2:

Define Performance Leader products and companies.

Answer:

A Performance Leader is a competitor or product that offers higher than industry-standard performance for a higher than industry standard price. More than 50% of a Performance Leader competitor's total unit volume is sold at price points above the Standard Leader product.

Test #3:

Define Price Leader products and companies.

Answer:

A Price Leader is a competitor or product that offers below industry-standard performance for a very low price. More than 50% of a Price Leader competitor's total unit volume is sold at price points below the Standard Leader product.

Test #4:

Define Stripper products.

Answer:

The Stripper product is a typical Price Leader product where both user and buyer benefits are lower than the Standard Leader product. These products offer lower Function and lower Convenience than the Standard Leader in return for their lower prices.

Test #5:

Define Predator products.

Answer:

A Predator product is a type of Price Leader product where the user benefits are equivalent to and the buyer benefits are less than those of the Standard Leader product. They offer the same Function but lower Convenience than the Standard Leader.

Test #6:

Define Next Leader products.

Answer:

A Next Leader is a competitor or product that offers much better than industry-standard performance for a low price to a specific subset of the industry customers. A Next Leader can do this because it has a low cost structure.

Test #7:

Define Reformer products.

Answer:

A Reformer product is a type of Next Leader product that reduces the benefits for the user, while increasing benefits for the buyer compared to the industry Standard Leader product. This product offers less Function but more Convenience than the Standard Leader.

Test #8:

Define Transformer products.

Answer:

A Transformer product is a type of Next Leader product that increases benefits for the user but offers, at least initially, fewer buyer benefits than the Standard Leader product. It offers more Function but lower Convenience than the Standard Leader.

Test #9:

What is Price Point bias and why should that concern us?

Answer:

Price Point bias is our company's discrimination against either Performance Leader or Price Leader products because of a concern that these products will damage our current profitability. The risk is that by not offering these high or low Price Point products, we may fail our Core customers and open their relationships to competition from our competitors.

Test #10:

Determine the Price Point of each of the following examples.

  • This company builds smaller than average homes on smaller than average lots. They build these homes in outlying locations and make non-essential features, such as microwaves and fireplaces, optional.

    Answer: This is a Stripper Price Leader.

  • This company is an adroit imitator of branded products. At a retailer's request, it creates look-a-like products at lower prices and without brand labels.

    Answer: This is a Predator Price Leader product.

  • This company sells in its well-known corn flakes and rice crispy brands and their spin-offs. It leads its industry.

    Answer: This is a Standard Leader.

  • This company had excess manufacturing capacity and agreed to produce a new line of products for another company, using the other company's brand name. This company had to compete with other manufacturers in order to become the producer of choice.

    Answer: This is a Predator Price Leader product.

  • This company is a leader in its industry who faced competition from a low-end competitor. In response, the leading company introduced a "fighting brand" priced near the price of the low-end competitor's product.

    Answer: This is a Standard Leader company offering a Price Leader product to block a Price Leader competitor.

  • This company is a book publisher with a back list of 4,000 titles on various subjects. These titles are all in the public domain, so they require no royalty payments. They are packaged for distribution through retailers at prices 30% below other books.

    Answer: This is a Stripper Price Leader product.

  • The YMCA offers fitness memberships at a price about 1/3 less than that of private fitness clubs and now has an image to match those clubs.

    Answer: This is a Predator Price Leader.

  • This company's product sorts through information on the internet to deliver clips of relevant news to the customer. It is cheaper and quicker than the consumer sorting through many databases himself.

    Answer: This is a Reformer Next Leader product.

  • This company offered long distance service at much lower prices, providing the consumer dialed 10-10-321 in order to reach the long distance line.

    Answer: This is a Predator Price Leader.

  • This company offers intravenous infusions, administered by a nurse in the home, for a price of $300 per day. This price compares to $600 in a hospital.

    Answer: This is a Reformer Next Leader product.

  • This product enables schools, hospitals and other organizations to create networks without wiring by using wi-fi.

    Answer: This is a Transformer Next Leader product.

  • This company is an online business providing free web-based software that lets users upload, view and edit their photographs free of charge and order professional prints from the web site. The consumers may also share these photos with friends.

    Answer: This is a Reformer Next Leader product.

  • This company offers subscribers DVD movies three at a time from a list of movies that is several times what the consumer might find at the local Blockbuster retail store.

    Answer: This is a Transformer Next Leader competing against a Standard Leader.

  • This company offers upscale merchandise and apparel to discerning consumers in upscale shopping malls.

    Answer: This is a Performance Leader company and product.

  • This company is the leader in the hotel industry. It offers products at the low, medium, high and super premium Price Points.

    Answer: This is a Standard Leader product offering Price Leader, Standard Leader and Performance Leader products.

  • This company produces the leading cola in the marketplace.

    Answer: This is a Standard Leader company.

  • This premium priced running shoe contains a microprocessor placed under the arch of the foot to measure the compression of a runner's stride.

    Answer: This is a Performance Leader product.

  • This leader in the snack food industry introduced potato chips flavored with a BBQ sauce produced by a leader in the BBQ sauce industry.

    Answer: This is a Standard Leader company producing a Standard Leader product.

  • This leader in the orange juice category introduced calcium to its juice without a price increase in order to compete with another leader who offered calcium in its product.

    Answer: This is a Standard Leader responding with an upgrade to the Standard Leader product.

  • This product is a bowling ball with printed images designed or chosen by the consumer on the bowling ball. This new bowling ball sells for about $140 compared to $80 for a typical bowling ball.

    Answer: This is a Performance Leader product.

  • When Lotus 1-2-3 dominated the spreadsheet market, various "clones" offered similar features for prices often half that of the Lotus product.

    Answer: The clones are Predator Price Leader products competing against Lotus 1-2-3 as the Standard Leader.

  • This leader in the motorcycle industry introduced a low cost model aimed at its Japanese competitors and another, even cheaper, model focused on the first time buyer. Both models carried a different brand name than the parent company's brand.

    Answer: These are Price Leader products introduced by the industry's Standard Leader.

  • This company competes in the credit card industry. It introduced a jet black card, offered by invitation only, with a $1,000 annual fee. In return, the consumer receives upgraded travel and personal help for travel needs, as well as special privileges at upscale merchants.

    Answer: This is a Performance Leader product.

  • This company vaulted to the top tier of the U.S. car rental industry by providing vehicle delivery in most local markets, as well as customer pick-up service, for lower prices than the on-airport services.

    Answer: This is a Reformer Next Leader.

  • This company specializes in creating boutique hotels. Each hotel is targeted at a specific type of traveler, with better than average amenities for a slightly higher price.

    Answer: This is a Performance Leader company offering a Price Leader product.

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