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