The greatest strategy move any business can make

In theory, all strategies are different.

Different businesses, different contexts, different solutions.

But in practice, there are repeating patterns. There are certain general “types” of strategy which you see again and again – and because of this, it is actually possible to simply copy a strategy from some other business, and apply it to yours.

Despite some of my rhetoric, I’m actually highly in favour of copying other companies, provided they aren’t your competitors.

Different industries pass through different stages of maturity, and so it can make a lot of sense to replicate moves that have been made in other more mature industries than your own.

Today, I want to talk about the greatest of those moves.

It’s one I’m starting too see more and more.

And it changes everything most people think they know about business.

The move in question?

Premium Cheap.

The idea here is very simple. Most people believe there are only two basic strategic options when it comes to price:

      1. Be cheap
      2. Be premium

We can look at almost any industry and quickly pick out examples of both of these moves. Indeed, these tend to be the among the first strategic positions to be gobbled up, since they’re so obvious.

If there isn’t a clear cheap or premium player in your space? Then grab it. Because this is the strategic equivalent of low hanging fruit – easy to apply, easy to understand, easy to sell.

But Premium Cheap?

This is something different. This is where you break free from the obvious premium OR cheap dichotomy, and instead make your offer premium AND cheap.

It should go without saying that this is pretty powerful stuff. Most people like cheap stuff, and they like premium stuff, and would prefer not to choose between them. And with Premium Cheap strategies, they don’t have to.

However it also goes without saying that this is hard to pull off.

In fact, it seems physically impossible.

Cheap options are generally created by removing service elements, making the offer “worse”, so that you can lower costs and thus lower prices (e.g. think Ryanair).

Premium options are generally created by adding service elements, making the offer “better”, which then improve the experience but naturally increases the cost (e.g. think Luis Vuitton).

So how the hell do you do both?

The answer is that you have to reject the underlying business model that is common in your category.

You see most “strategy” you see tends to get overlaid on top of the basic “generic business model” common to the category you’re playing in. Founders start with an undifferentiated foundation for their business, and then apply creative thinking to more surface-level considerations.

This forces them into the standard premium “or” cheap dichotomy, where you’re stuck on a sliding scale of adding / removing stuff.

However if you attack the underlying generic business model of your category, you can escape that by removing inefficiencies that increase price, AND improving service elements at the same time.

A textbook example of Premium Cheap can be seen with the fantastic UK gas and electric company, Octopus Energy.

They have a hyper explicit Premium Cheap offer, which they describe as:

“Outstanding customer service, at fair prices”

Basically they manage to have both the best service (by a long way), and the cheapest prices (by a little bit). Which is a pretty unbeatable combination.

They did this essentially by building their own in-house billing system (“Kraken”) and rejecting the complex legacy systems used by their competitors.

The detail isn’t really important – what’s important is just the basic principle of doing strategy work at a more foundational level in order to correct legacy issues present in the wider category. Issues which are seen by other companies as “just the way things are”, and aren’t up for debate.

Octopus aren’t alone.

Off the top of my head Revolut, Uniqlo, and IKEA (obvs) are also Premium Cheap, and all because they made similar foundational innovations in their categories.

Southwest Airlines were also Premium Cheap, and their example is especially interesting because they created a new “generic baseline category”, which new entrants then applied the standard premium OR cheap logic to. Ryanair are effective a “cheap” variant of Southwest’s original Premium Cheap model.

Pretty meta!

For a more approachable example, I have a participant in my Strategy Shortcut System program, Shea, who is building a fantastic Premium Cheap business in the veterinary space (Honor Pet), which like Octopus offers a much better service for a much lower price.

This alchemy is indeed possible.

But it requires deeper freer thinking than the vast majority of businesses are ever willing to engage in.

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