Philips Assumed That Its Customers Would Accept a Long-Life Strategy

On completion of the market review and market research, Philips decided to proceed with the launching of a major strategic effort to transform itself into the ˜˜long-life company. It made assumptions about the likely reactions of consumers and retailers to the strategy. It made assumptions about the planned pricing for the new products, and even about the technical design of the new long-life lightbulbs. The following are Philipss key planning assumptions:

1. A long-life strategy would effectively differentiate Philipss lightbulbs from those of the competition.

2. As previous long-life products by Westinghouse and Philips had shown, and as indicated by the market research, consumers would buy into the long-life lightbulb idea.

3. The long-life strategy would help Philipss retailers compete with their competitors . Philips believed that retailers were tired of seeing the same products advertised in a Sunday circular at different prices. For example, Home Depot would see Wal-Mart, in a Sunday ad, cutting its price on the same GE lightbulbs that Home Depot was carrying. Philips believed that many retailers were not happy about this and wanted to differentiate their products, but did not know how to do so. Philips believed it had the answer.

4. Premium pricing on a line of superior products would be acceptable to retailers and consumers. Philips did not want to compete on the basis of price because it knew that it could not be the low-cost leader. With the long-life strategy, the company would be bringing out a line of products that could not be compared directly with competitive lightbulbs. Philips would have a different product that would last longer. It would take Philips out of the direct comparison situation, such as matching the price of its four-pack with that of GEs.

5. The Philips engineering department had identified the proper line between life and light, so that it could provide the consumer with a series of lightbulb products that would be ideal for home use.