Cost Leadership Strategy Examples

Cost strategy leadership is simplistic in some ways, but highly effective when implemented correctly. Instead of trying to differentiate a product or service based on its features, cost strategy leadership dictates that cost alone can help to market an item to a targeted narrow audience. It isn’t necessarily about charging the lowest overall cost at any given moment, but is instead a combination of value, cost, and accessibility.

The cost strategy leadership of Redbox is an excellent example of this. For $1.20-$1.50 in most markets, a consumer can rent a movie as they enter or leave a grocery store. This allows people to see new movies for a cheaper price, but it isn’t as convenient a way to watch movies as online streaming through Hulu Plus or Netflix might be.

Cost Strategy Leadership Requires You To Know Your Market

In order for this style of leadership to be effective, it is incredibly important for you to understand what your target market requires. Papa Murphy’s is an excellent example of this. Instead of baking pizzas in their store, they sell them to customers in a raw state. This allows the businesses to sell products to customers who use food stamps and that means they can attract customers who might not otherwise be able to eat take-out pizza.

Sometimes it isn’t the wealth of a customer that is the target of cost strategy leadership. Sometimes it is the amount of disposable income that a targeted consumer has instead. Claire’s is a retail outlet that has maximized this particular strategy. They focus on low-cost jewelry and accessories for young women and teens with just a few high-end items. Having grown to over 3,000 locations in the US alone, it is clear to see how effective this strategy can be.

The actual value that someone receives can also be the target of cost strategy leadership. Five Guys is a prime example of this. Instead of having to add costs to get more toppings on a burger or sandwich, customers can receive multiple toppings and sauces for free. The orders are made from scratch and that means customers need to wait a little while for their food. To keep people occupied, Five Guys provides free peanuts for more increased value.

How Goods Are Delivered Is Also Part of This Leadership Strategy

Sometimes the ease of access to a product or service is what will set it apart, even if it is the most expensive product in a community. You can see this with businesses that are exclusively drive-thru in nature. Rather than divide the attention of a staff between a sales floor and an outside money maker, the drive-thru becomes the sole focus of the business. This means customers can have their needs met more quickly and that savings in time becomes the focus, not the actual cost of the product.

At its core, cost strategy leadership means setting a business, brand, or product apart from the competition by providing a higher level of value in some way. Whether that is actual cost, to specific demographics, or simply through time savings, better revenues can be had whenever a customer feels like they are saving money. That’s what this leadership style is all about.

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