Economic Gardening Key Concepts
Innovation is one of the key concepts behind the technical assistance associated with Economic Gardening Programs. Here’s a neat little picture to explain why innovation is so important to small businesses.
Let’s look at Volume Versus Price one quadrant at a time
- High Volume High Prices – Wouldn’t we all just love to be here? Nobody stays here long because every competitor goes here and drives prices down.
- Low Prices Low Volume – No one can survive here for long.
- High Volume Low Prices – Small businesses can’t survive here for long, either. At some point their prices will be undercut by someone who is better capitalized and can take losses as they convert sales.
- Lower Volume with Higher Prices is the only quadrant that offers long-term stability to small business.
Conventional wisdom is that companies need to cut prices when their competitors do to maintain their sales. The more difficult strategy is to add value that you can charge a premium for.
My local grocery store did an expansion a couple of years ago, when the Super Walmart opened down the highway in Baraboo. Instead of dropping grocery prices they expanded their specialty selections and carried more higher margin items. The area is known for meats and cheeses. They carry a number of local specialty cheeses which have been branded as Opahle’s. They’ve expanded their authentic Mexican foods (we have a growing Mexican population) and their organic foods. They offer items in sizes that appeal to empty nesters that make up a large portion of their demographic, and best of all if there is something they carry you want more of or something you wish they would carry, they will get it in for you. Corporate chain stores just can’t do that.
What does your company do that differentiates you from your competition? Are you able to get the demographic information you need to make these kinds of business decisions?