Lower Prices To The Consumer example essay topic

CASE: Reliable Insurance Q. Assuming that people today are no less security minded that ever before, what does the consumers' new-found focus on lower prices imply about how suppliers have marketed their products? Insurance companies in marketing their products have not made it obvious to the consumer the value or relevant uniqueness of their products, therefore the consumer may be assuming that all insurance policies are similar and therefore are basing their purchasing decision solely on price. Q. What sort of things could Urite do if he wishes to successfully offer a premium priced product? The sort of things Urite must do if he wishes to successfully offer a premium priced product is to offer products that are unique and / or add value for the consumer. The uniqueness or value adds must have relevant importance to the consumer. In order for products or services to create value they must satisfy a need or solve a customer's problem better than anyone else.

Therefore, products and services that solve problems gain value, and the tougher the problem the higher value, in turn commanding a higher price. The use of the Value-Chain as depicted in slides 27 can be used to look for ways to make the most of competencies and advantages, in turn attracting new customer and retaining the existing customers. The potential to create value is not constant across all segments of the market, therefore Urite needs to focus his efforts on the consumer with the lowest price sensitivity and forget all others (fire the customer), as depicted in slides 22-25. In addition to creating value, Urite needs to offer his customers a total solution to their insurance needs.

Currently, he is only offering home, auto, and liability insurance, by augmenting his core product offering with life and health insurance Urite can gain operating efficiencies in "Cost-In-Use" of his existing infrastructure as depicted in slide 34, and in turn gain some competitive advantage in lower costs. Another way to command premium price is to improve the quality of the offering, justifying the higher price. The nature of the quality must be relevant to the consumer and the quality can be real or perceived. Real quality can be achieved by providing customized products or services that meet the specific needs of the consumer or by adding features and capabilities that make the product unique and convenient. Perceived quality can also provide a premium price, for example, advertising in high-end well respected industry publications or perhaps having celebrity endorsements could give the perception of better quality. In summary, uniqueness, value, and quality (real or perceived) are all key factors impacting pricing.

The supporting infrastructure required to achieve this goal is to invest resources in marketing and creative abilities to sustain a quality supply of new and innovative products. Q. What sort of things might Urite consider doing if he discovers that he cannot do the things required to support a premium price? If Urite is not able to do the things required to support a premium price he may want to consider changing his entire business strategy. One such strategy could be to target the low price market. In order for Urite to be profitable in that market he must offer products with an acceptable level of quality, some standardization, and most importantly he will need to gain more market share (volume). In order for Urite to quickly gain market share he would need to merge with another insurance company. Merging not only brings additional market share, it also comes with new products and services that will augment Urite products.

In doing so Urite would gain benefits associated with economies of scale and cost reduction due to shared services being consolidated. Process innovations are another means of lowering the cost of a product through automation, re-engineering, or E-commerce. A good example automation and E-commerce is the use of the internet as another means of distribution. Urite could offer a self-service web site to the network of brokers and possibly end customers, where routine transactions such as renewals or account status can be handled without human intervention. All these options are aimed at reducing operating costs, and in turn translating that into lower prices to the consumer, and hopefully sustained profitability. The supporting infrastructure require to achieve this goal is mainly one of tight cost control and product standardization.

Incentives based on meeting quantitative targets should also be established to maintain market share. Q. What should Urite do? Urite should continue to offer his products that he is currently offering. He should focus his resources on building a brand that is innovative and different from the low cost producers. Urite needs to clearly chart a course for his company, develop a plan, and then flawlessly execute that plan. My reasoning is that if Urite follows the rest of the industry in merging and lowering prices he will be no different than his competitors. There maybe some short term advantages, but in the long run it is very difficult to sustain profitability if everyone is trying to compete on price rather than quality..