Why Companies Succeed: Price/Performanceby Colin Berkshire in Telecom
I have worked for big and small companies over my decades long career. I have seen companies destroyed and new ones emerge. And I have seen patterns.
The common pattern that I see is that companies succeed when they can offer the best price/performance ratio and find a way to make money while doing that. I think the formula is really that simple. Really.
OK, yes, you must communicate this to prospective customers, so marketing is important. But marketing is no more important than customer service, or manufacturing, or any other department. The marketers will tell you the company revolves around them, as will the finance department explain why they are the core of the business. But no department makes a company.
What matters is price/performance in products.
If you have a truly great product and you price it at a point that your competitors cannot, and you cam make money then everything falls into place. Marketing gets easier. Customer Service gets easier. Everything is easier.
Having a good price/performance is difficult for two or three reasons: some products are fully commoditized: they offer no enter performance so that can only compete on price and this erodes out all of the profits. Or, the products are better only to a small niche market (“Our milk comes in the finest designer plastic bottles.”) the trick is to design a product that is readily perceived as being better at a great price point. This takes genius. It’s why Steve Jobs was such a success.
I have been with several companies that were great financial successes. In every case they had a superior product that customers preferred, and they priced it aggressively and not at premium prices. They attained market share and volume and that drove margins and profits. Often these companies boast that they have the best products, the lowest manufacturing prices, and they cost no more than competition.
I will maintain that Apple under Steve Jobs was a success because they had the best price/performance. The same for Google in its early days. The same for Ford motor company. The same for Tesla. Over and over you will see that leadership was attained by having better price/performance.
I will grant you that old, established companies like Verizon or Comcast keep market leadership through political influence, regulatory protection, and by predatory practices. But if you aren’t a giant, you need to focus on price/performance. That is the most important thing in any growing business.