CAN LOSING DELIBERATELY BE A WINNING STRATEGY?

It rather seems to be a boggling question as any strategy is adopted and followed to win the game rather than losing it. Then how can losing be conducive to winning a game? Well, losing deliberately can often help not only to stay in the race but also win it, provided such a strategy (to lose) is corroborated by other variables that offer a winning combination. If this question is put to a military commander, he would probably nod his head in approbation. This is because in wars sometimes military commanders have to order their troops to retreat. Some might conceive it to be a humiliation but actually it is an invitation to the enemy to fight on the chosen terms and conditions laid down by the other side.

Now the question is whether such a strategy can be used by businesses or not? The answer is yes. In fact, many businesses, particularly small ones have adopted this strategy. However, they are oblivious of how to use it with proper conjunction. Nevertheless, a few businesses have actually managed to properly practice this strategy and have started using it as a common praxis. This strategy is most commonly used in sales promotion. The following two real examples will throw more light on the use of this strategy.

Example 1:

Mr. Bhushan Shah is the CEO of an SME that is in the grocery wholesale business for more than 30 years. He started his company in 1983 with a capital of 1,750 pounds only. Today it is a big name in the industry. The company manufactures a brand of flour that is priced very competitively. However, with increased competition, the company had to spend more money on promotions to keep the flour selling. But, this was turning out to be an expensive affair and the company had to increase the price of the flour to meet the cost.

One day, Mr. Shah entered a shop in a busy location to buy himself a soft drink. He found the shop very busy. However, he was taken aback when he saw that the shop was not selling any of their products, particularly the flour. He made an inquiry and came to know that the shop was a defaulter of the company.

Therefore, the company stopped sending goods to that shop. But, Mr. Shah had something else in mind. He settled the previous account with the shop and re-supplied them with their products at much reduced price. In a week the shop was filled up with Mr. Shah’s products. He followed the same strategy with other shops as well based on their location. The strategy worked. In just a couple of month’s time, the sale of the flour increased drastically.

Example 2:

Mr. Bharat Popat is the proprietor of a small grocery store near the Northolt area in London. The shop was doing well as it was the only shop operating in the area. However, with the arrival of two new competitors, Mr. Popat started finding it difficult to operate the shop. Sales decreased, thereby stock level decreased and finally he saw customers decreasing as well. Mr. Popat knew he had to do something to get his business up and running very soon. He then came up with a strategy to attract more customers. He found that milk was an item that had the highest turnover. Therefore, he decided to sell milk at under cost. On the other hand, he increased the prices of other goods marginally. This had the desired effect. Customers started thronging into his shop. Later, he also decreased the price of butter that had the second highest turnover. Mr. Popat turned his business around.

The Strategy

In the first example, Mr. Shah managed to create publicity for his products by choosing locations to display his products that are highly frequented by customers. He also provided special offers on the products in those particular locations. Mr. Shah, thus, could save quite a huge amount of money on promotions. The retailers also acted as promotion agents and a brand image of the products were created.

In the words of Mr. Shah, “Those shops are visited by customers from every walk of life. They come to the shops, see the products and spread the word. When the same customers visit any other similar location and find the same products being displayed, a brand image is created. We have drastically reduced our promotional expenditure on mass media following this strategy.”

In the other example, Mr. Popat attracted customers by providing huge discount on the items that are highly purchased by the customers. These items are very price sensitive and any change in their prices can influence the customers. Other items that are non-price sensitive, customers seldom mind paying a few extra pennies. In most of the circumstances they do not even bother about the price of such items. Here, psychological pricing comes into picture. Customers perceive that they have made a saving by paying less for their usual items. Therefore, they can afford to spend extra on other items. In the process they end up buying other items which they normally would avoid in a different shop.

To quote Mr. Popat, “I have seen people who come to buy milk in my shop would hardly leave without buying other items. Since they are getting their primary item at a much discounted price, they do not mind paying extra for other items. The marginal increase in the price of the other items compensate for the reduced price of milk and butter.”