Analyze the Market

• Analyzing the environment is important before determining which strategy would work best. For example, if the market is saturated with low-cost providers, a business may desire to create additional value in their products or differentiate those products. Attempting to compete against other businesses in a saturated market will likely demand a strategy that is different from the one being used by most other businesses.
  
  

Low-Cost Strategy

• A low-cost strategy is one in which organizations offer products and services at the cheapest prices possible. Often, these products and services are stripped of many electives, and the focus is on encouraging many purchases with lower profit margins in order to earn higher revenues. This strategy works well for large retailers and chains.
  
  

Differentiation Strategy

• A differentiation strategy requires creating either a niche market or options within the products or services that are appealing to customers. Some customers require products or services that cater directly to their needs. Such a strategy will give those customers a choice in tailoring the products and services to fulfill their needs.
  
  

Value Strategy

• A value strategy requires organizations to offer products or services that are worth the cost. The cost might be high, but the value is also high, making the product appealing. For example, a high-end service like a five-star resort versus a local motel will likely succeed by pursuing a value strategy. Bundling products and services can also create more value for customers.
  
  

Price-Sensitive Customers

• If businesses are offering value and their products or services are expensive, an appropriate strategy may require either differentiating their products from the competitors, or moving to a low-cost strategy with fewer options. Customers will thus have an option in a price-sensitive market.
  
  In an environment where products are customized and customers are price sensitive, a business can consider bundling packages to create additional value. You might find value strategies used with cell phone carriers, Internet providers and vacation resorts to attract price-sensitive customers.