“We must be seen as the best deal in town.” Such powerful words, and the first step to an accelerated tumble straight to the bottom of the profit margin. These are the words of MetroPCS Chief Operating Officer, Thomas Keys, whose company competes strongly with price.
As we’ve emphasized time and again, engaging in a price war makes it nearly impossible to raise prices or reclaim and tout your brand’s competitive advantage against other competitors in your industry. Once you set the bar low for your product or service’s true value, you’ll only break the bank trying to convince customers of a higher value.Â
If MetroPCS maintains its competitive angle in lower prices, and other cellular companies join in the price war to level the playing field once and for all, how would MetroPCS, a company whose reputation revolves largely around offering the lowest price, compete?
With AT&T’s having just completed a full network upgrade to their 3G towers to HSPA (High-Speed Packet Access) 7.2 speeds, their service alone offers a higher standard than MetroPCS, and if price were no longer a competitive differentiator, MetroPCS would lose against AT&T.
Assuming that right this very instant all cellular provider costs were equal across the board, MetroPCS would fall behind competitively, as it won’t be upgrading its 4G network for stronger wireless broadband service until mid-to-late 2010.
With a weaker network and no price difference, consumers would leave MetroPCS for AT&T because AT&T has a stronger competitive advantage.
While MetroPCS has a low-cost company model that allows it to cut prices and compete on price, service providers such as AT&T have built a strong reputation in arenas outside of price, as well as exclusive contracts for specialty phones such as the iPhone.
Tags: compete on price, Competitive Advantage, competitive differentiator, customers, cut prices, engaging in a price war, lower prices, price war, profit margin, stronger competitive advantage
