|Smart Meeting Industry Professionals and Organizations know: producing and delivering products and services less expensively increases competitiveness, more clients generally create a lower average cost per unit and that being so good it makes it difficult for people to find substitutes creates competitive advantage.Smart companies know poor profits don’t result from failing to differentiate, but from failing to establish permanent barriers for competition to enter. If you can excite people by the quality of the experience you provide, they will erect their own barriers to insulate you from your competitors. But since you can’t keep competitors out forever, maximize profits by being smart, being nice and playing fair.
With luxury cars, as Mercedes once dominated Europe, Cadillac dominated the United States and both were very profitable. Although luxury cars have not become a commodity, when Lexus and Acura entered, Cadillac and Mercedes suffered profit erosion.
Cadillac and Mercedes did not experience pressure on margins, but experienced significant profit declines because of the loss of market share brought about by the inability to establish barriers to new entrants.
Smart companies don’t engage in price wars. Coca-Cola and Pepsi have depressed their earnings by a century of battles to damage each other rather than increase their bottom lines. Although a few Meeting Industry Organizations and Professionals have launched “discounted services” the industry has, for the most part resisted the self destructive Coke versus Pepsi strategy
Although the industry would never engage in “price-fixing,” it does realize that it can try to increase profitability by either lowering prices in an effort to gain market share, or maintain prices where they are and hope that their competitors adopt the same policy.
If Marriott suspects Hilton is planning to offer reduced room rates to gain market share, Marriott could immediately announce that they will match whatever reduction Hilton offers. Hilton now knows that lower room rates will not help them to gain market share.
To maintain margins during price challenges, immediately react to your competitor’s intentions and simultaneously suggest a willingness to jointly maintain the higher price levels.
Nice companies often exhibit cooperative efforts that are synonymous with wise management. You’re not operating illegally if market conditions cause you to raise, lower, or maintain prices and it’s not illegal to operate profitably.
The need for Meeting Industry Professionals and Organizations to interact with each other involves many players including food and beverage, audio visual, lighting, advertisers, speakers, hotels and entertainment, to name just a few. All vendors must work together to create optimal systems for their end customer, the client.
Find ways to increase the size of the pie, rather than trying to increase the size of your piece by taking from others involved in the selling and servicing process. Remember that it is not “them and you”…it is “us,” all of “us” working together in order to satisfy the client. Look for ways to place emphasis on win-win propositions.
Play fairly or, as happened with Nintendo…be defeated in the end. In the 1980s, Nintendo owned 95 percent of the gaming business in Japan and 90 percent in North America. Their market capitalization was higher than Sony or Nissan.
Nintendo always moved slowly with new technologies and constantly squeezed the profits of the entire industry, irritating game designers, manufacturers and retailers.
When Sega introduced technology that game designers and retailers loved they were happy to flee from Nintendo’s dominance. Nintendo instantly went from the industry’s leading player to being one among many.
Producing and delivering Meeting Industry products and services less expensively can increase competitiveness and more clients generally create a lower average cost per unit. While being so good it makes it difficult for people to find substitutes create competitive advantage, maximizing profits is essential.
Sustainable competitive advantage seldom results from competing like Coke and Pepsi, eroding profits for both. Marriott putting Hilton on notice of matching commission reduction may prevent a downward spiral for both and, in effect, presents a cooperative alternative.
If Nintendo had been willing to share more of the profits with game designers and retailers, it may have been able to maintain its dominant position much longer. Compete and win, be smart, be nice and play fair.
|This article is provided by Joe Murtagh, “The DreamSpeaker” www.TheDreamSpeaker.com an MPI member and an expert at solving industry challenges. For keynotes, workshops, consulting and questions or a free report on The 3 Most Common Mistakes MPI Members Make email Joe Murtagh at Joe@TheDreamSpeaker.com or call 800-239-0058.
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