by Rick Baker
On Mar 18, 2011
At our Leaders’ workshops we tie two marketing concepts together. The two marketing concepts are ‘the PQS Triangle’ and ‘Differential Advantage’. Both of these concepts are ‘vintage’ marketing thoughts…..things we learned a few decades ago.
PQS Triangle is a picture, designed to make it clear businesses can set its marketing strategy based on a combination of Price, Quality, and Service. Rarely, if ever, can a business succeed if its marketing strategy is designed to win at all of P, Q, & S. Put another way – it is virtually impossible to deliver the lowest Price, the highest Quality, and the b set Service all at once. Something has to give. For most of our Clients the thing that has to give is Price: most of our Clients are not in a position to offer the lowest Price.
Differential Advantage answers the question: Why do our Clients buy from us rather than do nothing or buy from one of our competitors?
When the PQS Triangle and Differential Advantage are combined we have the essence of the marketing strategy.
For certain businesses the marketing strategy does contain Price – ie, the business can compete by offering better prices than their competition.
We think this is rare [even though we recognize many of our Clients’ Clients want it or demand it].
We think many businesses struggle and fail because they use a low-Price strategy when that is a doomed strategy.
However, there are 2 scenarios when a business can compete using a low-Price marketing strategy.
Those 2 scenarios are:
- Volume Leadership scenario: when your business has massive volume you can use your buying clout to reduce your supply costs and you can use ‘economy of scale’ to reduce your operating costs. Then you can reduce your Prices, hold a Price advantage over your competition, and grow your business. Big-box stores can always offer better Prices than boutiques.
- Educated Entrepreneurship scenario: when you have obtained specialized knowledge [for example, from being an employee at a big business] you can draw on your specialized knowledge to compete with bigger, less-entrepreneurial or more-bureaucratic businesses. This is how many entrepreneurial businesses get started.
Now – there may be other scenarios where you can use a low-Price marketing strategy and run a profitable and sustainable business.
If there are then we would really like to know them.