www.strategyaudit.com.au
One of the most common questions I get is how you get away from competing on price.
A couple of things are common in the situation that leads to the question:
- Someone else has control of the value chain. This is often the case with an FMCG product. In Australia two chains have 75% market share, the supplier, even to the MNC behemoths can only watch as they set the retail price, shelf position and category definition.
- The questioner has not spent the time and brainpower to consider what really matters to the customer. They have therefore failed, or chosen not to to make the hard choices that are central to building a brand.
Back to the Australian FMCG situation, as it relates to produce. Coles and Woolworths do not stock any proprietary brands at all in produce, just store branded product. The producer therefore has no control at all about what happens in store, but they do have a choice: to build a brand in alternative channels.
In some produce categories, hard vegetables, for example, the chains have close to the FMCG share of 75%. Carrots and onions seem to be pretty commoditised, but other categories like sensitive summer fruit, mangoes, stone fruit, and berries like strawberries and blueberries, have a far larger share in the alternative channels simply because the state of the product really matters to consumers. The 17 year old casual in Coles after school does not care much about the sensitive nature of the strawberries, but the greengrocer often does, the product matters, so they make decisions based on what matters.
Not every consumer will care enough about their strawberries, but perhaps enough will to make the development of a brand worth the effort, time, risk and cost.
When you accept that it is only price that matters to consumers, you have made a key strategic choice. That choice is that you will not care enough to find out what else may really matter to consumers sufficiently that they will make their purchase choice on a basis other than price.
Things that matter are usually beyond the physical dimensions and capabilities of a product, they are the stories that make the difference.
Why is one toaster worth more than another, they both toast bread, but perhaps one is just a tool, the other a piece of kitchen art based on the stories of the designer.
In simple terms, Focus on what really matters
