Analysis 42: Target Customer Purchases By Price Point

• Video #69: Overview of Products and Services Part 1: How to Look

• Video #23: Full Explanation of Price Points and Competitor Types in a Market

• Video #78: Competing Against Low-End Competition Part 1

• Video #79: Competing Against Low-End Competition Part 2

• Video #19: Definition of Standard Leaders

• Video #20: Definition of Performance Leaders

• Video #21: Definition of Price Leaders

• Video #22: Definition of Next Leaders

• Video #24: Price Point Specialists in Hostility

PURPOSE: This analysis quantifies the percentage of their total purchases that the target Core customer segment buys at the Performance Leader and Price Leader price points. The company would use this analysis to determine the risk it incurs by failing to cover price points purchased by its target customer segment.

• Audio Tip #81: Standard Leader Products and Companies

• Audio Tip #82: Performance Leader Products and Companies

• Audio Tip #83: Price Leader Products and Companies

• Audio Tip #84: Next Leader Products and Companies

• Worksheet #15: Identifying High Potential Price Points

APPROACH: The company's marketing and sales staff surveys customers and makes estimates of the purchases by price point of its target customer segment. This analysis is best done using units as the basis of measuring market share, however, if units are not available, dollar purchases will be adequate.

This analysis assumes that the company undertaking it is a Standard Leader considering coverage of Performance Leader and Price Leader price points. The same analysis can be done if the company is a Performance Leader or Price Leader.

Once the company has completed this analysis, it should evaluate the risk it incurs by the decision not to cover a price point its target Core customers purchase today or could purchase in the near future. If the target customer segment would view the company's decision not to cover a price point as a "failure", then the company incurs significant risk by not covering the price point. This "failure" opens the company's Core relationships to other suppliers and may foreclose the company's entrance into other potentially attractive customers in its target customer segment.

• Audio Tip #86: Withdrawing From a Product Price Point

• Audio Tip #87: Potential Low-End Competitors in a Marketplace

• Audio Tip #88: Questions to Determine Your Response to a Low-End Competitor

• Audio Tip #89: Price Point Bias

Examples of:
Standard Leader » Performance Leader » Price Leader » Next Leader» Industries With Four Price Points »

• Self Test #15: Identifying High Potential Price Points

Return to Diagnose Products and Services: Price Point Bias

Analyses:

• Analysis 38: Definition of Price Points in the Market

• Analysis 39: Market Share by Product Price Point

• Analysis 40: Industry Growth by Product Price Point

• Analysis 41: Price Point Product Mix by Competitor

Symptoms and Implications: Symptoms developing in the market that would suggest the need for this analysis.

• New entrants are growing much faster than the market

• Price points are growing at differential rates as companies enter higher end niches to improve profits

• Companies are trying to create upscale niches

• Some competitors proliferate products around the heart of the market

• One or more companies have introduced a better product at a lower price

Perspectives: Conclusions we have reached as a result of our long-term study and observations.

• "Attention K-Mart Copiers"
  To match experienced price competitors, management must be realistic about what a low cost and low price strategy really entails. (1987)

• "When Product Mix Matters"
  There are several price point specialists. Some are better positioned than others for long term success in a hostile market place. (1991)

• "Why Do Leaders Lead?"
  There are four potential kinds of leaders in the marketplace. In order to be successful, each must follow its own particular rules. (1986)

• "Success Under Fire: Policies to Prosper in Hostile Times"
  A hostile market evolves through six predictable phases. Most companies fail, withdraw or become acquisitions before this evolution is complete. They fail because their management policies were not effective. The few who survive and prosper do so by making decisions that follow two rules: attract customers and discourage competition. Losers lose by not following the second rule.

• "The Choice of New Products"
  Companies add new products whether or not a market is hostile. But the choice of which products are most advantageous to add varies with the market situation. (1995)

• "Turmoil Below: Confronting Low-End Competition"
  There are four major types of competitor who offer your customers low prices. Each of them have distinct weaknesses. Your response to them depends on your answer to several tests that you would apply to your market and your competition.