How to Use the Best Cost Provider Strategy

The best cost provider strategy focuses on continuous cost reduction.

A business can provide value for its consumers by using the best cost provider strategy and giving the consumer a higher-end product at a lower cost. A strategic business plan defines a course of action based on the defined competitive strategy. The best cost strategy works well when the target customer is extremely price sensitive and small changes in price bring about large changes in sales volume. The best cost strategy may be a risky strategy to undertake as it may be difficult to sustain the lowest pricing in the market and still turn a profit.

Instructions

1. Identify a niche for your product with a target consumer that is extremely price sensitive and has low switching costs associated with the purchase of a product in your category.

2. Add features or services to your product offering so that the target customer is provided with value that is on par with competitive products in the market place.

3. Price your product so that you are the best cost provider and have the lowest pricing when compared to competitors that have product offerings with the same feature set. Implement this strategy continuously over time by creating a sustained effort to continuously cut costs across your value chain.

4. Reduce overall costs by re-engineering cost activities using techniques such as outsourcing and increased automation to retain your best cost provider differentiation.

5. Attract customers by marketing your best cost provider strategy and differentiating your product based on cost and high value.

Tips & Warnings

• Adapt to changes in customer needs for product features and quality, their sensitivity to price, and the entry of newer technology into the market place.

• The best cost provider strategy is easily imitated so a best cost provider needs to be extra vigilant of competitors.