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How can we improve our contribution margin? |
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You can improve your margins two ways. If your company is differentiating, you can raise prices. The company differentiates by creating high demand with a good design, high awareness, and easy accessibility. You sacrifice some of the demand with a higher price.
If your company is a cost leader is more inclined to reduce material and labor costs, but offer a competitive price structure. They achieve this by lowering the MTBF and , positioning the product at or near the trailing edge of a segment. They will reduce labor costs by automating their plants. Demand is driven by aggressive pricing and margins are maintained from a lower cost structure.
See Six Basic Strategies for more information on Differentiation and Cost Leadership.
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