Counterintuitive strategies can generate high margins while remaining attentive to the needs of customers

 

A counter-intuitive strategy leads to increased sales and high margins, often because people are willing to pay a premium for ordinary, everyday goods and services. Professor and author Dan Ariely provides experiments in his book Predictably Irrational to demonstrate people's irrational spending behaviour. According to Ariely, most people don't know what they want until they see it in context. As a result, some businesses use counter-intuitive strategies to provide a framework for irrational spending. Consider the strategies of good organizations.

Counter-Intuitive Approach

People pay an annual membership fee at Costco for the "privilege" of shopping-to-spend! The majority of Costco's profits are generated by this counter-intuitive strategy. Nonetheless, most businesses have been unable to replicate it.

Starbucks' coffee is expensive. Why? Starbucks does more than just sell coffee and other products. Indeed, Starbucks' strategy is to provide a "Third Place" for people to congregate: at home, at work, and at Starbucks. Why do people pay such a high price to consume goods and hang out at Starbucks? One reason is that Starbucks doesn't mind if you stay and don't buy anything. Starbucks is aware that a sufficient number of people will spend. And the longer people stay in a location, the more likely it is that they will spend. Starbucks is not only selling coffee and other products, but it is also creating a social gathering place environment-an excellent counter-intuitive strategy!

Apple charges a premium for new phones (and other products) that do not render older phones obsolete in the short-to-medium term. For example, an iPhone X purchased last year is still in excellent condition and will work well with Apple's new operating system, iOS 12. Nonetheless, Apple upgraded the iPhone X, confident that people will pay a premium for essentially the same product they purchased a year ago. Choices are central to strategy. To take advantage of a counter-intuitive strategy, a company must recognise that strategy is about making decisions about what it will and will not do to reach and retain customers. That's all! It's not about expansion, as many businesses claim. It is the strategy that will determine whether the company grows or declines.

Growth in and of itself is the result of the strategy. Creating a proper counter-intuitive strategy begins with a basic understanding of your existing and potential customers' and target markets' attitudes and insights. Firms must use validated market research tools and techniques on a regular basis to stay close to the economic, social, and market environments in order to understand developments affecting prospective customers. A Counter-Intuitive Strategy Is Insufficient A counter-intuitive strategy is insufficient. To develop value creation solutions that do not jeopardise customer care, a company must employ counter-intuitive thinking as it examines its ongoing business activities. Working capital management, for example, necessitates counter-intuitive thinking. People do not believe that the ideal inventory level is zero. But it's true!

To be sure, the uninitiated might believe that a company would be better off with a large inventory in order to eliminate the possibility of being unable to fulfil an order. Just-in-Time inventory systems are popular because holding inventory represents cash that is locked up and unavailable for use elsewhere in the business. The more quickly inventory turns, the better. Working capital management is critical to a company's success. It may seem counterintuitive, but putting properly trained and intrinsically motivated frontline workers in the right jobs, removing direct supervision, and empowering these workers to serve customers is a good business practise. This approach will add more value to the business than a hierarchical system with under-empowered, under-trained employees who require constant supervision. This is why Southwest Airlines and FedEx exist.and others put people first and customers second.