Choosing the right business strategy for customers engagement and retention as well as profitability is the second most important thing in business. Understanding the business, its customers and potential customers is the first. for any business to survive and increase its profitability, the business owner must be able to choose the right business strategy to engage and retain its customers, increase profitability and increase its market share.
What is a business strategy
Business strategy is a set of plan or tactics a business adopts to achieve its long term aims and objectives. Important to the concept of business strategy is luxury and cheap price. Choosing the right price is what defines a business and its class. Apple is known for luxury, Rolex is also known for luxury. Techno is known for cheap price, Infinix is known for cheap price, in fact, China as a whole is known for cheap products. And this is the business strategy that has worked for it so far so good. It has helped it move its economy from poor to one of the most powerful in the world and a major contender in the world of business and technology.
Pricing strategy-luxury vs cheap price
A lot of literature, as well as content writers, has examined and discussed business strategy. But we will be looking at business strategy from the angle of the price (pricing strategy). Therefore, the two strategies we will be looking at are the luxurious product and cheap products.
Advantages of luxurious prices
- High profitability
- It encourages advancement and upgrades
- It creates class
Disadvantages of luxurious prices
- The firm may go out of business
- It is hard to increase the customer base
- Competition with similar quality with a lower price may create problems. It is easy to argue that it is easy to sell cheap products and hard to sell expensive products. But it is not as it looks. For a firm to sell at a high price and remain in business, the price must meet with quality. That is what has worked for Apple, Rolex and other expensive product sellers, and that is exactly the same reason blackberry has gone out of business. Innovation and change in the business model as time requires is important in the long-run survival and profitability of a film.
As mentioned above, there are many brands that are known for luxury and Apple is one of them. Not too long ago, Apple crossed the trillion dollars landmark. It is, therefore, wrong for anyone to say selling products at high prices will lead to a business’s death. It is just right to say selling products at the wrong price will cause the death of a business. Luxury price is not the same as wrong price. a firm may sell at a low price and still be selling at the wrong price whereas selling at high prices is the reason some businesses are flying high today
When it comes to selling at a cheap price, Chinese firms comes first. It is interesting to know that the quality of these products is the same and in some cases better than the ones sold at expensive prices by other countries. A product does not have to be expensive to be of high quality. If adding value and engaging a large market is the goal, a business could sell high-quality products at a lower price. Low price has worked for china, it worked and is still working for Google and other firms. Imagine clouds hosting by google being free for a year when sellers of bad hosting with high downtime charge an expensive price to sell a bad market. Selling at a high or low price does not matter as long as a firm is selling at the right price. Not selling at the right price is what makes businesses to go out of business.
Advantages of cheap prices
- Cheap prices bring about ease of market expansion. Low price increase the customer base of a firm. Consumers want the best product at the lowest price they can get it.
- It ensures a business remains in business in the long run and increase its market share.
- It is the best competition strategy
Disadvantages of cheap prices
- Making a good profit may be hard
- Very low price of products may lead to the death of the business
- Low price may be the reason why some customers will not buy. some people prefer class.
Reasons why businesses go out of business
- Wrong price
- Business location
- Price and quality of alternatives
- Promotion and marketing campaign
- Government decisions
Wrong price: Selling at the wrong price is the major reason some business go to extinction. Some business owner can not decide the right price for their products and did not hire an expert to do this for them. Selling product above the right price could mean no sale, no sale means the products will either expire or lose value and this will lead to the death of the business.
Wrong business location: The location of the business determines the survival and profitability. Locating a business at the spot where it is close to the market encourages sales and reduces the cost of transportation. Business location is very important. Selling pork meat in a Muslim environment is a wrong choice of business.
Price and quality of alternatives: A business owner must ensure its price is competitive and product quality is in line or above industry quality. If not, he or she may soon go out of business.
Promotion and marketing campaign: If you don’t say this is where I am, nobody will know where you are. A good product is useless if no one is buying. Advertisements compel buyers. Sales promotion is a must for the survival of a firm.
Government decisions: Government decisions could make or mar a business and they are what they are.