Can Price Be a Distinctive Competency?
A distinctive competency is something you are really good at and your competition isn’t. Think of this as a unique core competency that you have in the marketplace.
It is possible to have more than one distinctive competency, but in my conversations with companies, it’s more common that companies haven’t found or created a distinctive competency.
Distinctive competencies are rarely features. Product features are often copied quickly, but distinctive competencies persist for a long time.
With that background, can pricing be a distinctive competency? Usually not. Most prices can be copied quickly. However, there are two cases that deserve more inspection.
First, what about companies that create new pricing models? For example, when Netflix started renting movies using a monthly subscription model, they changed the pricing model. In some situations, like Netflix, you could argue this could be a distinctive competency. However, other pricing model changes, like the first airline to start charging for checked luggage, are not distinctive competencies. The difference is how easily the price model change can be copied in the market.
Second, is low price a distinctive competency? Low price is certainly a brand statement, but the real distinctive competency of companies like Walmart is their ability to control costs. Walmart employees focus heavily on driving costs out of the supply chain so that if they have to lower price they can. It would be difficult for another company to compete with Walmart on price.
Pricing is important. Making intentional decisions around which prices to charge is crucial to a company’s success. However, it’s probably not their distinctive competency.
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