1. Which customers are you targeting?
2. What is the important need you’;ll fulfill?
3. How will you meet this need in a unique way?
Without setting these types of limits or boundaries on your activities and offerings, you run a much greater risk of falling into the commodity trap.
If you’;re targeting the same customers, performing the same activities and providing the same offerings as the competition, trade-offs have not been made.
Helping managers identify their key strategic trade-offs is the Trade-off Zone. The Trade-off Zone is a visual representation of the trade-offs, or lack of trade-offs, being made in a market. The tool identifies six universal trade-off factors and allows for the addition of other factors customized to the business.
The six primary factors are quality, service, convenience, selection, experience and price.
First, the specific type of customer that the offering is targeting is selected. In some cases, the root of poor strategy is trying to be all things to all customers. If some potential customers are not happy with how you’;re choosing to bring value to the market, it’;s a sign that trade-offs have been made.
The manager then rates their offering for each of the trade-off factors as Low, Medium or High, as seen by the targeted customer. Competitive offerings are then plotted, creating Trade-off Profiles, to determine where differentiation exists within the Trade-off Zone.
If your Trade-off Profile mirrors the competition, work needs to be done to determine the Trade-off factors targeted customers value and how to create positive differentiation around them.
Three questions can start your thinking about trade-offs:
1. Which potential customers are you choosing not to serve?
2. What potential product/service offerings are you choosing not to provide?
3. On which trade-off factors (quality, service, convenience, selection, experience, price) are you able to provide the most differentiated value to your targeted customers?
Trade-offs are difficult to make. So, many managers don’;t make them. Do you?