Regular readers of this column know that I am teaching two courses this semester: a graduate course in Strategic Management and an undergraduate course in Operations and Supply Chain Management. While the topics covered in these courses will diverge throughout most of the semester, they start out in a very similar place for important reasons. In the first couple of weeks of both courses, I spent a significant amount of time on how firms compete in their markets.
Since strategy is all about determining how to devise a plan for a firm to be successful, understanding how firms compete is a foundational and fundamental element of studying strategy. For my students studying operations and supply chains, they need to understand how those functions of the firm support how the firms compete. So, a great way to start both classes is by discussing how firms compete in their markets and one of the best ways of analyzing how firms compete is by looking at what we call “order qualifiers” and “order winners.” This may also be a good time to examine the order qualifiers and order winners of your business and its products.
Before we define and then delve more deeply into order qualifiers and order winners, let us first look at how customers determine what they choose to buy. When a customer is determining which product or service to purchase, they are typically considering the following overall attributes:
- Price/Cost: Basically, the purchase price of the item. Although, the more astute customer will also consider any potential future operating and/or maintenance costs.
- Quality: There are two main types of quality buyers consider. The first is performance quality, which considers the operating characteristics of the product. A product can have various types of performance quality (e.g., an automobile has speed, comfort, safety, and many other performance quality parameters). The second is conformance or consistent quality, meaning, how well the product meets its specifications each time it is made. Again, looking at automobiles, a Jaguar might have better performance quality, while Honda and Toyota have more consistent quality.
- Time/Delivery: There are two types of time parameters buyers consider. The first is the quickness or speed of being able to get the product, while the second is being on-time, or delivering when promised.
- Flexibility: The buyer may also consider the firm’s ability to customize its products or have a variety of choices.
- Service: When buyers choose whom to buy from, they may also consider how good their customer service is.
It is clear that there are a number of product characteristics that a customer can consider when making a purchase as mentioned above. However, not all firms are going to be the best at all of these. So, how are you going to decide what you are going to do best and how will that help you win business? This is where order qualifiers and order winners come in.
Order qualifiers are the minimum product requirements of the attributes above a company must have in order to be considered by a customer for a purchase. For instance, a company’s price cannot be so high that customers will no longer consider buying it. Another example is that the customer is only willing to wait a limited amount of time for their product and if you exceed that, they will not consider buying it from you. A third example might be that a customer is not willing to buy your product if some customization of the product is not available.
On the other hand, order winners are the product attribute or attributes that sets your product apart from other products in the market. For instance, you might have the lowest price, the fastest delivery time, and/or the best customer service. Therefore, when it comes to competing in any marketplace, you must meet ALL order qualifiers, while having at least one order winner which will compel the customer to buy from you.
In order to select the appropriate order winner or winners for your market, you need to understand what the customers in your target market value the most and be sure you are able to deliver that to those customers. For example, Wal-Mart has always targeted budget-conscious consumers, and therefore, its order winner is price. McDonald’s prime market is families with children and therefore, has made price, speed, and consistency its winners. In the automobile industry, companies like Mercedes and BMW have made performance quality its order winner, while Honda and Toyota have focused on reliability and consistent quality.
As business owners and leaders, you should regularly examine your order qualifiers and order winners because they typically evolve. Over time, order qualification tends to become more difficult as the minimum standard keeps improving. You also need to be sure your order winner is still a winner as competitors will often come after your competitive advantage. In addition, be sure to understand and monitor the changing needs of your customers/target markets as your winner may not remain a winner forever.
Order qualifiers and order winners are a great way of understanding competitiveness in the marketplace. I hope my students grasp these concepts and I hope they are also helpful to you and your business.