Question

"Our cycle has always enjoyed a reputation for a quality born out of sophisticated manufacturing technology that was imported. Over the course of years, bicycle technology in the country has become indigenised and cheaper with attendant loss of quality and reliability to a certain degree. Our main competitors are using indigenised technology and are selling their cycles at a much cheaper price. The consumers acknowledge our higher quality level but refuse to accept the extra price that it implies. In other words, the extra quality that our sophisticated technology gives is, in their views, not worth the extra price."

Hint:

Value addition, customer education, and offering tiered pricing can help differentiate products while maintaining competitive edge.

Answer 1

Step 1: Identify the problem.
The company faces a situation where its bicycles are priced higher due to superior manufacturing technology, but consumers are unwilling to pay the extra cost, even though they acknowledge the higher quality. Competitors using more cost-effective, indigenised technology are offering cheaper alternatives, which makes the company's premium price unjustifiable in the eyes of the consumers.
Step 2: Suggest solutions.
- Product Line Diversification: The company could introduce a budget line of cycles with indigenised technology. This would appeal to the price-sensitive segment while maintaining the premium line for customers who value quality. This approach would allow the company to cater to both markets. - Value Addition: The company could offer value-added services such as extended warranties, free servicing, or bike accessories with the premium cycle models. This would justify the higher price and create added value for customers. - Consumer Education: Through advertising campaigns, the company can educate consumers about the long-term cost-effectiveness of quality products. Emphasizing durability, lower maintenance costs, and better overall value in the long run could help consumers see the worth of the extra price. - Focus on Customer Loyalty: The company could also consider loyalty programs where customers receive discounts or special offers when they purchase additional cycles or services, which would help retain loyal customers despite the higher cost.
Step 3: Conclusion.
By offering tiered pricing, value-added services, and educating consumers about long-term benefits, the company can make its premium bicycles more attractive and justify their price.