Competition is the nature of any market. As an entrepreneur, you will likely find another seller dealing with the same products you are offering. The sellers may only change a few ingredients, packaging, and prices. This aspect is standard practice across all markets.
For this reason, price wars have become the main ground for business competition. Businesses focus on offering the lowest prices than their competitors to win customers. With this aspect, maintaining the quality of the products becomes a problem. Entrepreneurs work on using the cheapest materials to avoid making losses as they have to keep their prices low.
However, some businesses opt for an alternative approach to keep their competitors at bay. These businesses focus on offering affordable prices while maintaining the quality of their products. Such ventures use a model dubbed Discount with high-quality.
What is the Discount with high-quality business model?
This model involves selling products with high-quality through introducing discounts to attract customers. The focus is to offer the best quality than the competitors but also keep the product prices low.
The Discount with high-quality business model is a good idea for a competitive environment. The only way to survive in such an environment is by attracting a large customer base by offering high-quality products at discounted prices. The aim is to offer high-quality products at the lowest prices possible to beat your competitors.
How does it work?
The Discount with high-quality business model involves purchasing bulk products at lower prices and offering them to consumers at discounted wholesale prices. This model eliminates a number of third parties to avoid additional costs.
The businesses using the model work directly with manufacturers to ensure the quality of their products is at the required standards. Also, they package and offer it to the final users at the lowest possible prices. Hence, they have control of the processes that enable them to reduce costs while delivering high-quality products to their customers.
To perfect and realize this goal, merchants using the Discount with high-quality business model have a set number of products available in their stores. Also, they use private labels on each of these products to enable the customers to trust them. The sellers go on to offer attractive discounts, which acts as customer magnets. Through this approach, they can remain competitive in their niche.
In other words, this model use discounting as additional ammunition in the price wars. They compete on prices without injuring the products quality, which offers them a strong competitive edge.
Examples of Discount with high-quality business model
The Discount with a high-quality business model is not a new idea in the commercial arena. These businesses realized that price wars are not a sustainable business model as they can hurt brand reputation by compromising the quality of the products in the long run. Many supermarkets and large retailing stores have been using it to attract and maintain a solid customer base.
An excellent example of a business utilizing this model is ALDI. ALDI is a leading discount supermarket with over 10,000 stores spread across the globe. This company offers high-quality products at discounted prices. Also, ALDI features 1800 only and runs daily, weekly, and seasonal special offers on all its products. This approach helps it attract many customers in all its stores.
Tesco is another retailing store chain using the Discount focusing on a high-quality model. This British groceries and general merchandise retail operates over 4670 shops. The retail offers discounted, high-quality products at affordable prices across its stores. Using this model has enabled it to become the third-largest retailer globally.
Other retailers and departmental stores using this model include Lidl, ASDA Stores, and Ross Stores.
Pros and Cons of the Discount with high-quality business model
Like other models, Discount with high-quality is not perfect. The model is suitable for keeping your business afloat. However, it has some benefits and shortcomings that you need to weigh before adopting it as the operational model for running your business. Here they are:
Pros
Enhance business sustainability in a competitive arena
Competition is the modern nature of business. Each seller is working to win customers by lowering their prices. As the focus shift to prices, maintaining the quality of products becomes hard. However, with this model, you can offer high-quality products at the best lowest prices possible. This aspect helps you give your competitors a run for their money. So, it is a perfect idea for sustaining your business in a competitive industry.
Easy to build and maintain a strong customer base
Naturally, customers are always looking for quality products at affordable prices. Many players in the market cannot achieve this goal. They either offer low prices and compromise the product’s quality or sell high-quality products at high prices.
By applying Discount with high-quality models, the seller balances the prices and quality. This aspect attracts many customers. Since the discounts are not one-time offers, the customers are likely to become loyal. This way, your business creates a solid customer base which means continuous and returning sales.
It saves the marketing costs
Businesses operating this model use their brand name on all the products they sell. This aspect makes it easy for the customers to associate it with high-quality and low prices.
As such, your business will not need to spend time and a lot of money promoting new products under your series. Since the customers already know your business, they will likely buy it without requiring much information on its quality.
Cons
Possibility of poor perception of the quality of the products
While you might be focusing on delivering high-quality products at low prices, customers might have some doubts about their authenticity. Many customers associate high-quality with high costs and vice versa. So, operationalizing this model can be challenging for an audience with this perception.
Require large investment
This model is not easy to implement for businesses with weak financial muscles. The concept requires you to buy products in bulk to enjoy the economy of scale benefits. Without bulk buying, it will be challenging to offer quality products at low prices. You can only provide time to time discounts which might not have a long-term effect on your profitability.
Conclusions
In a word, the discount with a high-quality business model helps an entrepreneur meet the desires of a customer effectively. Customers can get high-quality products at discounted prices. However, it is easy to implement for sellers to buy products in bulk. Despite this, it is a great way to enjoy a sustainable competitive advantage.
