Comments on: Low cost is not a strategy

By: Giorgi

Giorgi — Sat, 27 Feb 2010 20:02:42 +0000

Sometimes costumer think: Low price, low quality, nornal price – normal, and high price high quality. this must be also regarded.

By: What to do when your main competitor is your best customer?: Ask A Good Product Manager: Your product management questions answered

Thu, 24 Jan 2008 03:00:45 +0000

[...] Many of these questions get to the overall strategy for your product — defining the product’s distinctive competence, whether you want to try and compete on cost, what distribution channels are most important, etc. Your product strategy should be your guide in determining how you handle this situation. [...]

By: links for 2007-07-06 « D e j a m e S e r

links for 2007-07-06 « D e j a m e S e r — Fri, 06 Jul 2007 22:35:19 +0000

[...] Low cost is not a strategy: How To Be A Good Product Manager: Product management tips If you want to be a good product manager, do not pursue a low cost strategy unless you truly are offering a commodity product that can not be differentiated at all from the competition. Instead, you should develop a strategy around differentiating your pr (tags: management) [...]

By: Jeff Lash

Jeff Lash — Thu, 28 Jun 2007 12:03:13 +0000

Roark — Most products are differentiated somehow, whether it be more or fewer features, durability or reliability, size, speed, design, color, etc.. The actual number of product that truly are the same across competitors is remarkably small. As soon as you start talking about making trade-offs, you’re talking about a differentiating a product.

“A competitor added this new feature — it will bring our cost-per-unit price up, so should we do it?” The low-cost “strategy” would say that you have to do it, just do it more inexpensively than the competition. If you decide not to retain parity, then you’re no longer low cost, you’re differentiated.

I don’t know anything about Witold’s business (see comment above), but I’d guess that the product is somehow differentiated from the competition. I doubt the marketing campaign is, “Our beer tastes just as good as the others, it just costs less.” The product is likely differentiated somehow, including based on price.

Differentiation need not be exclusive from low-cost; in fact, there are many examples of situations where a product needs to pursue differentiation and low-cost (see the PDF of Differentiation Versus Low Cost or Differentiation and Low Cost: A Contingency Framework).

I would argue that there are very few products whose strategy is solely around being low-cost, and that most products will need to distinguish themselves from the competition and make trade-offs between features and cost. In those cases, I agree with you completely that the product manager is in “the perfect position to make these important trade-offs and must clearly understand customer’s needs in order to do so.”

By: Roark Pollock

Roark Pollock — Wed, 27 Jun 2007 20:53:56 +0000

Jeff,

I agree with everything you included above but one item. I disagree with this statement:

“if you are producing a non-differentiated product, you do not need a product manager”

If you do decide to pursue a low-cost (not price) strategy, you still must produce a product that can maintain parity with its competitors in delivering customer benefits. If you can’t maintain customer benefit parity, then your low cost strategy is doomed. I would argue that maintaining customer benefit parity with competitors and keeping a significantly lower costs than competitors is extremely difficult due to the difficult trade-offs between features and costs that will inevitably arise. A product manager is in the perfect position to make these important trade-offs and must clearly understand customer’s needs in order to do so.

By: Witold

Witold — Tue, 26 Jun 2007 09:33:32 +0000

I’m Product Manager in beer business in Poland. My company is not very big but low cost strategy is the most important think for us. I have to say that it is good strategy for us.