There are two well established and universally accepted business-level strategies: cost leadership and product differentiation. Cost leadership lets you compete on price while still maintaining above average profitability (compared to your peers), and product differentiation lets you compete on benefits (personal utility) that purchasers will gladly pay more money for.

Think dish washing liquid vs. Rolex watches. Both compete in industries that address broad audiences, but Palmolive does not position itself as a luxury solution, and Rolex, even though it’s “just” at watch, does not position itself as a mass market product.

Price isn’t so much the driving factor—although income strata do play a big role—as needs and desires are.

Maslow's Hierarchy of Needs

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Mapping these products against Maslow’s hierarchy of needs (above), Palmolive sits between Physiological and Safety (eating off clean dishes means you won’t die from food poisoning, but also your neighbors won’t be impressed that you have clean dishes), and a Rolex watch is nestled in between Esteem and Self-actualization (any watch will tell time just as well, but this one reminds you and the people around you that you are awesome).

These strategies are not mutually exclusive; every company strives for cost efficiencies, differentiation, and market leadership of some sort. But either strategy requires markedly different organizational, operational, and marketing execution, which is why a company must decide how it wants to compete, what it wants to be when it grows up.

But what about the middle of the pyramid? How can you compete there when it’s generally assumed that if you don’t lead in cost or differentiation that you can at best earn average profits? There is a third strategy: Most Bang for the Buck (MoBaBu!). MoBaBu lets you cover the Safety-Love/belonging-Esteem spectrum.

Sure, Rolex might provide more bang for the buck when compared to Urwerk, a pretty good $75,000 watch (sorry, I haven’t done my homework on surfactants in dish detergents). But that’s not the point. There are broad categories where companies have established MoBaBu leadership. Hyundai in automobiles for example—they may only be 95% as good as Toyota or Honda in fit, finish, and performance, but at a lower cost and with a lot more features. You definitely get more for your $.

Come to think of it, that’s what Consumer Reports “Recommended” rating is all about.

MoBaBu isn’t just a mishmash of cost and differentiation strategies. It does require both elements, but most importantly MoBaBu requires customer insights, market foresight, and true leadership: a corporate culture of empowerment that creates and rewards engaged employees who communicate upward what they think the market can really benefit from.

MoBaBu shoppers are not on the cutting edge, but they sure can do simple value math, and retire comfortably because even though in their minds they never truly sacrifice, they still are thrifty. Marketers are well advised to engineer for this savvy subculture that has great spending power and is experiencing recession fatigue.

Is your organization structured to exploit this opportunity?

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