Companies pursuing this strategy strive to cut down their costs to become the lowest cost producers in an industry so that they can gain market share by charging lower prices.
Pricing may be
- defensive (to protect market positions when competition is low) or
- aggressive (to increase market share when competition is intense.)
2. Product/Service Differentiation
Companies pursuing this strategy strive to differentiate their products from those of competitors in terms of quality, type, or means of distribution.
These companies are then able to charge a premium price for their products.
This strategy is successful only if the price premium is greater than the cost of differentiation and the source of differentiation appeals to customers and is sustainable over time.