How Different are A Cost-Centric Strategy and A Value-Centered Strategy?
What is the difference between a cost-centric strategic approach and a value-centered strategic approach? Originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
A cost-centric strategic approach focuses on cutting costs and developing cost-effective strategies, to keep the price of the product low and profits high.
A value-centric strategic approach focuses on excelling in product quality and customer satisfaction. Such companies thrive on the psychological demands of customers that invoke a sense amongst them where they feel contented and satisfied.
Given below are the differences between the two approaches on various parameters:
End Goal
The difference between aims mainly differentiates the two types of companies. Cost-strategic companies aim to cover most of their niche market by cutting costs. Value-centric companies aim to maximize customer satisfaction by providing exemplary quality.
Costs and Expenses
The costs borne by cost-strategic companies are comparatively less than value-centric companies.
Product Pricing
Cost-centric companies usually keep the prices of their products low to offer a product that can ideally fulfill the niche market demands. Samsung uses such an approach. The products of the value-centric approach bear a high price as quality specialization is the main focus. Apple uses such an approach.
Operations
A cost-centric approach is an essentially driven strategy. Companies look t how much it costs to make a product, keep a profit margin and then quote the price accordingly. A value-centric approach is essentially externally driven. Companies look at their customer values and requirements and then design the product accordingly.
Final Thoughts
To decide the better approach between cost-centric and value-centric, you must understand your business offering well. There are great examples of both kinds. If your product has something unique that your competitors cannot offer, go for value-centric. Otherwise, it’s better to stick to a cost-centric approach to keep the prices of the product low.
Contributed by Metvy
