A no frills concept concentrates PDF

Preview

Summary

A no frills concept concentrates...

Description



A no frills concept concentrates on the core components of the product offered  no frills: only the necessary stuff to keep the costs down A no frills approach addresses customers who are not willing to pay for “added value”

The goal of the no frills strategy is to gain the cost and/or the price leadership. You try to sell a product that satisfies the customer needs like the competitive products but with a lower price. Therefore, you need to safe money in all places and waive everything that is not needed. Examples for this kind of strategies are Ryan Air, Aldi and Fielmann. Reached are this cost savings through a lot of possibilities. Especially the experience curve concept takes a huge part. Also, through a bigger market share, the product gets a lot more profitable.  More market share  more ROI (Return on Investment)  Why: o Experience curve effects (the unit cost of a standard product decline by a constant percentage (typically 20 – 30%) each time cumulative output doubles) o Economies of scale (the cost per unit decreases with the increase of the units) o Market power o Quality of management  On average, a difference of 10% points in market share goes in hand with a difference of about 5 points in ROI.

Example Dacia: Situation  For many customers the typical premium cars are too expensive/sophisticated  Car ownership and prestige are less important for customers

Solution  Creating a “no-frills” offering by slimming the product concept to its fundamentals  Price position 30-50% lower than competition

Example Ryan Air:

Ryan Air only focusses on the “must-haves” to save money. Everything that goes beyond the flight itself and de Hand luggage must be paid by the customer....