But first firms should weigh the benefits against the costs. When companies match their strategies to each country’s contexts, they can take advantage of a location’s unique strengths. By asking a series of questions that pertain to each of the five areas, executives can map the institutional contexts of any nation. The five contexts are a country’s political and social systems, its degree of openness, its product markets, its labor markets, and its capital markets. The best way to do this, the authors have found, is by using the five contexts framework. A better approach is to understand institutional variations between countries. But these analyses can be misleading they don’t account for vital information about the soft infrastructures in developing nations. Corporations also depend on composite indexes for help making decisions. Many firms choose their markets and strategies for the wrong reasons, relying on everything from senior managers’ gut feelings to the behaviors of rivals. If Western companies don’t come up with good strategies for engaging with emerging markets, they are unlikely to remain competitive. These gaps have made it difficult for multinationals to succeed in developing nations thus, many companies have resisted investing there. Part of the problem is that emerging markets have “institutional voids”: They lack specialized intermediaries, regulatory systems, and contract-enforcing methods. Many firms simply go with what they know-and fall far short of their goals. And drivers with clean records want to be rewarded.It’s no easy task to identify strategies for entering new international markets or to decide which countries to do business with. Price does matter, it learned, but there’s more to the story: Many drivers worry about being hit with premium hikes if they’re in an accident. But in the early 2000s Allstate conducted some research that caused it to revisit that assumption. Key steps include identifying “fence” attributes that will prevent current customers from trading down from the existing offering carefully choosing features and names to create clear differentiation and value and setting prices using feedback from in-house experts and, when possible, drawing on market research.įor decades the auto insurance industry operated on a simple assumption: Consumers are highly price-sensitive, and most will buy the least-expensive plan they can find. The SolutionĪ multitiered offering (typically with three options) can use a stripped-down product to attract new customers, the existing product to keep current customers happy, and a feature-laden premium version to increase spending by customers who want more. Key steps include identifying “fence” attributes that will prevent current customers from trading down from the existing offering carefully choosing features and names to create clear differentiation and value and setting prices using feedback from in-house experts and, when possible, drawing on conjoint analysis and other market research.Ĭompanies often crimp profits by using discounts to attract price-sensitive consumers and by failing to give high-end customers reasons to spend more. The author, a consultant who has helped many organizations adopt G-B-B pricing, presents a step-by-step guide to devising, testing, and launching the strategy. There’s nothing new about this concept, of course-think of the different grades of fuel at any gas station and the varying packages marketed by cable TV providers, to name just two examples-yet many companies and industries have failed to embrace it. A multitiered offering can use a stripped-down product (the “Good” option) to attract new customers, the existing product (“Better”) to keep current customers happy, and a feature-laden premium version (“Best”) to increase spending by customers who want more. Companies often crimp profits by using discounts to attract price-sensitive customers and by failing to give high-end customers reasons to spend more.
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