Low Prices Are Not Always Your Friend

Entry 6
Original article:
http://www.businessweek.com/smallbiz/content/apr2008/sb20080414_027855.htm?chan=search

My Opinion;

When we buy a product, we tend to buy cheaper product. However, it is not always be a truth. We just compare the price among same products. We do not buy a lower price product if they have a different quality. Because it's lower price means lower quality. Lower quality will makes the customer disappointed. The heart of this article is that point. When the company has a low cost strategy, they give a small salary to close a gap. In that event, the laborer will lose their motivation and bad quality product will come out. Furthermore, in the event that the company use the low quality low material, that will give a price competitiveness to the company.

What if the product become useless because of it has no durability?
Customers will not buy that product never and ever, and the corporate images will lose their prestige also. It means low prices are not always your friend. So, the company has to read customers' mind and the market research is important thing too. As you know, Nokia is the leading company in the world's cell phone market. Its market share on cell phone is almost 33%. They have an excellent competitive power in producing and marketing. So how is Nokia keeping its position in the period of a deluge of cell phones? The strength of Nokia is its competitive price. They make low price products which helps them sell lots of cell phones. If they sell a few products, they cannot earn much money. However, they have a ‘quick sales at small profits’ strategy. This puts Nokia in the lead in the cell phone market. In an era of information technology, many customers want to use cell phones which have a more variety of functions. I had once used a Nokia phone for two years. At that time I was satisfied with the price, but when I compared my cell phone’s functions and design with others', I was dissatisfied. At that time most of the cell phones were flip phones and had a camera function, but mine was not. Nokia was poor in the progress of developing the cell phone’s functions and designs, and they did not concentrate on the customers' taste, but only on the product’s price. On the other hand, customers did not focus on the price much. That was the point that Nokia had missed and had to overcome.

It would be great to customers to offer the same product with a low price. However, many companies try to offer low quality, and bring a focus into selling more and more. It will make the company's image and growth potential decreased. And the customers will become to look the other companies.

20501008 Jeong-Hwan Kim