Low cost or cheap?

In my post earlier today I talked about buying a new (used) cell phone.

A few weeks back I brought my old Palm IIIe back to life. My Palm IIIe was my second Palm product (my first was the original Palm Pilot). Both Palm PDAs were fantastic. They were durable (I can't tell you how many times I dropped them), and were great on batteries. The mono-chrome screen was okay and easy to read.

I found my trusty Palm IIIe in the bottom of a box a couple of months ago and hit the power button. Dead. I threw in a pair of new batteries. LIFE.

A bit of searching around led me to the Chapura PocketMirror, and in no time I had Calendar and Address Book synchronization with Outlook.

I should also note that the cell phone I'm using is a hand-me-down from my wife. It is a first generation Motorola 2G phone, that is in baby blue and missing the antenna. Still, the reception is fine and the battery lasts forever. Also, it will probably haunt me and last longer than anything else I buy. I won't be shocked if I am back using it again by this fall.

In any event, the phone I bought on eBay that I'm waiting for (hopefully it arrives tomorrow), is a Palm Treo 650. It of course has the old faithful Palm PDA applications, and also the phone. It also has a camera and video camera. So, I can also pull my Flip video camera out of my pocket and leave that at home too.

It will be sad to re-retire my Palm IIIe. But it will be nice to only have to schlep around one device again.

So - am I low cost or cheap? I'd like to think that reviving an old cell phone and PDA, and then upgrading by buying a used device on eBay makes reflects my low-cost business strategy.

Trends for 2009: #18. Survival of the fittest (i.e. cheapest)

Over the last 10-20 years it has been relatively easy to get into business and stay in business. In general the North American economies have been running in overdrive. To be profitable almost all you had to do was actually produce something of reasonable quality at a reasonable cost.

In 2009 that isn't enough. The two types of companies that will prosper in 2009 are:

1. Those who have low-cost in their cultural DNA. You are already thinking "Wal-Mart", "Costco", "Ryanair", "Southwest Airlines", and perhaps some Indian call centers or IT development shops. AND,
   
2. Companies who can provide innovative ways to deliver greater productivity to other businesses.
   

Today, I'm blogging about the LOW COST STRATEGY.
If you look back at the classic definition of a low-cost strategy by Michael Porter, you look at business tactics like:

• Opportunity to capture considerable market share
  
• Natural advantage or preferential access to inputs
• Process engineering skills - which grind every wasted nickel out of product design, manufacturing, and distribution
  
• "Standard" products with relatively little differentiation that are easy to manufacature
• And also that are perfectly acceptable to the majority of customers
• Technology that will reduce costs
• Sustained access to inexpensive capital
• Close supervision of labour
• Tight cost control
• Incentives based on quantitative targets.
  
• Efficient distribution channels.
  

It is very important to note that Low-Cost does not necessarily equal Low-Price or Low-Quality. Low-Cost only means that a low-cost provider can produce the same product as another supplier at a lower cost. They can still sell it at the same cost and therefore make a bigger margin, or they can get into a price war, sell above their cost while their competitors are forced to sell at a loss, and consequently come out the winner.

What is a Marketer to do in 2009? Strategies to follow include:

• BE a Low-Cost company. If you are already a low-cost company, get reacquainted with the strategy basics. If you aren't a low-cost company and you haven't already memorized the list above, then I suggest you buy Michael Porter's book. You can't become Low-Cost overnight. It requires a fundamental change in business strategy and culture. If you are prepared to go this route, be prepared for a challenging yet ultimately rewarding journey.
• DISCOUNT your wares, and prepare to eat your margin. Why? Because your low-cost competitor is about to stick it to you!
  

Will I be right? The year will tell!

• Follow this blog and watch for the next marketing trends I'm forecasting for 2009.
• Feel free to contact Market GoGo to discuss this further.

Even Wal-Mart is setting up to be LOWER Cost

In times of financial turmoil, the thinking goes that the company with the lowest cost strategy "wins". Typically, Walmart is seen as the company with the ultimate low cost strategy. Company lore includes stories of Sam Walton and other Executives sharing rooms when they went on business trips.

Conventional wisdom is that companies should be looking at ways to reduce their costs dramatically in a time like the current recession. If you can believe it, it looks like even Walmart is looking at how it can trim costs!

Report on Business (via Reuters) reports that Walmart is set to slash prices and unveil changes to its branding (probably that blue background and yellow sun that we've been exposed to from US commercials over the recent past, as well as the new slogan "Save Money. Live Better.").

In fact, Reuters is also reporting that in the US, Wal-Mart is continuing to cut prices 10-30 pct on many items.

As the low-cost and low-price retailer, Wal-Mart expects to to win sales and new customers in the current economic environment. Wal-Mart's message will focus on value, value, and more value.

In fact, the slumping economy is helping Wal-Mart in two ways:

• They are playing on the fragile confidence of the consumer, and
  
• Negotiating lower prices from vendors.
  

So - watch for Wal-Mart to thump their competitors hard this year. At the same time, their's is a great strategy to copy regardless of what business you are in.