What is strategy?
One of the definitions for “What is Strategy” in the dictionary reads “a plan of action designed to achieve a long term or overall aim”. When you have a goal in mind, strategy is about how you would reach that goal. In this post, we will understand strategy in terms of value.
Business is all about delivering value to the consumer. A similar product manufactured by two different companies may have varying price points. A section of consumers would be happy paying a high price for a similar product. Why would they do that? The company selling the product at a high price is delivering a higher value. Higher value for the same set of features. Remember that value could be both tangible and intangible. Value is perceived.
How is value linked to strategy?
What are the two most common goals of a business?
- Increase revenue
- Increase profitability
If company A is offering a higher value for a similar product or service as company B, they would make a higher revenue by selling the same number of units.
This leads to higher revenue with equal number of unit sales. This also would more often that not lead to a higher profitability. If it doesn’t, the company needs to definitely look at the product pricing and indirect expenses.
So, strategy could be defined as how you create value for the consumer.
How do you define value?
While creating a strategy for achieving your business goals, the first step is to define value. This is where most businesses and sales teams struggle. When the value definition is uncertain and vague, you would encounter high proportion of leads being lost to “high price”.
When a customer rejects the sales pitch stating high price as the objection, teams often get busy evaluating the product pricing strategy. Customer does not pay just for the unit product. Customer pays for the value.
- The same quality cheese burger may be sold by one fast food restaurant for $1.00 while another may price each at $3.50.
- One digital marketing agency may charge a client $499.00 per month as retainer. The same services from another agency may cost $2500.00 per month.
Remember, customer pays for the value. The next time you encounter a “High Price” objection, question your value proposition and statement. Have you clearly defined value?
That is the starting point for creating a winning strategy for your business.
Once you have a clear definition and understanding of Value for your customer, you can work on creating and selling value.
I will follow up this post with a few examples on defining and selling value. “What is Strategy” hence will be a series of posts. Please subscribe to receive email notifications regarding upcoming posts.