A change of paradigm

news: A change of paradigm

Until recently, Portuguese exports benefited from offering the lowest price in the market, the so-called ‘first price’. There were four advantages to this.

Firstly, the distribution channel was obvious: large surfaces (wholesalers and hypermarkets) – kingdoms where price is important.

Secondly, it was relatively easy to penetrate these large surfaces. There was a simple reason for the latter accepting the incoming line of products – price. Sometimes, they even used Portuguese products for ‘white’ or ‘own’ brands.

Thirdly and fourthly, there was justification not only for the final consumer to buy the product, but also to repeat the purchase – the product was the cheapest on the market.

However, as Portugal gradually loses the ‘first price’ to North Africa, the Middle East (Turkey), Eastern Europe or Asia, all these four points are no longer true. Portuguese manufacturers now have to consider that perhaps large surfaces are no longer the obvious channel. Specialised stores might be more suitable, or direct supply to hotels, restaurants, cafeterias, health clubs, more expensive department stores, catering companies, institutional entities and so on. There is also so-called modern distribution (convenience stores, etc.) or direct sales (mail, etc.). Maybe yes, maybe no, one has to study the options.

Even if the large surfaces prove still to be the best distribution channel, the main reason for entering them, offering the lowest price in the market, has been lost. Without a famous brand and a clear strategy that ensures that market segments will be reached, what incentive do large supermarket chains have for taking established items off their shelves and offering Portuguese products instead?

Why would they be willing to run the risk that the end customer will stretch his right arm in order to buy our product instead of the left to reach the one he usually buys? It is not cheaper, it has no visibility or desirable image. It is just another brand. Why should the consumer exchange what is certain for what is uncertain? It may be that the odd customer would like to try something new, but the majority of consumers do not like taking risks.

Last, but not least, even if the end customer decides to take a risk and try our product, there is no guarantee that he will like it and repeat buy. Our product may be good as far as we’re concerned, but tastes differ. It may have a bitter twinge when the customer wants something sweeter. It may be well designed when he values comfort. We might have bet on convenience when he prefers durability.

When it lost the price war, Portugal lost the four main reasons for many of its exports to be bought: an obvious channel, an easy to enter line and a reason for the end consumer to purchase and repeat purchase. What can we infer from this? That new realities require new strategies because change is not a symptom of making mistakes in the past, but the need to adapt oneself to the future. In a word, intelligence.