HAS counterintuitive strategyIt results in better sales and high margins, often because people are willing to pay a premium for normal, regular goods and services. in his bookpredictably irrational,teacher, author dan ariely provides experiments to show people’s irrational spending behavior. ariely says that most people don’t know what they want unless they see it in context. That’s why some companies provide the framework for irrational spending with counterintuitive strategies. consider aspects of Costco, Starbucks,Y of Apple strategies.
counterintuitive strategy
At Costco, people pay an annual membership fee for the “privilege” of shopping, to spend! This counterintuitive strategy generates most of Costco’s profits. Still, most companies have failed to copy it.
Starbucks coffee demands a premium. Why? Starbucks doesn’t just sell coffee and other products. In fact, Starbucks strategy is to provide the “third place” for people to gather: home, work, Starbucks. Why do people pay so much to consume products and hang out at Starbucks? One reason is that Starbucks doesn’t care if you stay in and don’t buy anything. Starbucks knows that enough people will spend. And the longer people stay in place, the more likely they are to spend. Starbucks not only sells coffee and other products, but also creates a gathering environment – a great counterintuitive strategy!
Apple charges a premium for newly released phones (and other products) that don’t render existing phones obsolete in the short to medium term. For example, the iPhone X purchased last year is in perfect condition today and will work fine with Apple’s new operating system, IOS 12. However, Apple updated the iPhone X; people will surely pay a premium for virtually the same product they bought a year earlier.
Strategy is about choices
For a company to take advantage of a counterintuitive strategy, it must realize that strategy is about choosing what it plans to do and what it won’t do to reach and retain customers. That is all! It is not about growth as so many companies claim. It is the strategy that will cause growth or decline. Growth, per se, is the result of strategy. Developing a proper counterintuitive strategy starts with a basic understanding of the attitudes and viewpoints of your existing and likely customers and target markets.
On a regular basis, companies should use validated market research tools and techniques to stay close to the economic, social, and market environments to understand developments affecting potential customers.
Counterintuitive strategy is not enough
A counterintuitive strategy is not enough. A company must apply counterintuitive thinking when examining its ongoing business activities to develop value-creating solutions that do not diminish customer service. For example, managing working capital requires counterintuitive thinking. People would not expect the ideal inventory level to be zero. But it is! Undoubtedly, the uninitiated would think that a business would be better off with lots of inventory to eliminate the possibility of not being able to fulfill an order. Just in time Inventory systems are popular because holding inventory represents cash tied up and not available in the rest of the business. The faster the inventory turns, the better. Effective working capital management is crucial to the success of a company.
It’s counterintuitive, but excellent business practice to put properly trained and intrinsically motivated frontline workers in the right jobs, eliminate direct supervision, and train these workers to serve customers. This approach will create more value in the business than a hierarchical system with employees without authority, poorly trained and with a lot of supervision. That’s why Southwest Airlines Y FedEx and still others put people first and customers second.
© 2018 Michel A Bell