Leaders stress quality to offset competitors’ lower prices

Symptom: Some industry leaders emphasize and advertise superior quality rather than meeting the low price of the new entrants.

Implications for the market:

  • Advertising quality can protect the leader's share as long as enough customers perceive a quality difference large enough to offset price discounts offered by the competition.

  • The strategy becomes risky, however, as soon as an objective third party proclaims quality parity. Once that happens, the industry leader who has been claiming quality is most likely to suffer.

    • The endorsement by an objective third party can sometimes raise the perceived quality of a new entrant's product above that of the established suppliers.

    • As a result, established suppliers can lose the trust, and then the share, of their customers. Share lost because a customer no longer trusts the assertions of the supplier is lost for a much longer time than share lost due to any other reason.

  • Companies claiming quality advantages that cannot be confirmed by disinterested observers are therefore putting their customer franchises at risk.

Recommended Reading
For a greater overall perspective on this subject, we recommend the following related items:


Perspectives: Conclusions we have reached as a result of our long-term study and observations.

  • "Hostility in a Differentiated Market"
    A bottle of wine is surely a differentiated product. Nevertheless, the table wine industry underwent the same economic traumas faced by more traditional industries.

  • "Convenience: Much Tougher Than it Looks"
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  • "How Customers Buy"
    Customers are often faced with a large number of possible suppliers. How does the customer screen these suppliers to find the one best choice for his need?

  • "Reliability: The Hard Road to Sustainable Advantage"
    Most hostile markets have a large segment where competitors are few and the rewards are great for those who make the effort to get established. This segment is the "reliability" segment.

  • "The Tallest Dwarf"
    A suppliers' goal is to take advantage of any market volatility, to take share wherever possible. Doing that requires understanding of what customers need. What are buyers buying?