If you take a photo a few years in a row in the same shopping street, you will immediately notice that the majority of brands and names have changed over the years. Undoubtedly, some of those brands will not only have disappeared from the shopping street in the meantime, but will even have gone bankrupt. In 2014, while shopping, you could easily walk into the V&D from the Kijkshop and no one could have predicted that both brands would disappear from the street two years later.
We see that pattern more often: a large retail chain goes bankrupt and everyone seems to be surprised by it. For example, who except a single insider had well really see that a chain like McGregor - which was known as a serious, high-quality brand - could no longer pay the bills? For those who pay attention, however, it is not always that difficult to predict which companies and brands could soon be very difficult. A model that comes in handy here is the NoCompromise model, designed by the Dutch retail strategists of Eysink Smeets.
A family of strategists
Eysink Smeets is one of the world's leading retail consultancy firms. The Dutch family business - at the helm include father Hans and son Rik - is responsible for numerous retail strategies of famous brands and has already saved many a struggling brand from impending demise. The NoCompromise model is the house brand: an understandable, logical model that - not unimportantly - in practice works.
In this video, Rik van Eysink explains the NoCompromise model entirely on the basis of OAD: a Dutch travel specialist who went bankrupt in 2013:
A landscape in four quadrants
The NoCompromise model from Eysink Smeets divides a sector into four quadrants, based on two axes: on the x-axis the value and on the y-axis the price. This concerns the value that consumers attach to a certain brand and the price that they experience. More specifically: it is about perceptions from customers, not to the bare numbers.
We start with the value factor. Consumers are happy to purchase a product that in their eyes represents a lot of value. If costs do not play a role, we naturally prefer to go for the best of the best. We want to get as much value as possible, but there is a 'but': the price. We are generally not prepared to simply put any amount on the table for that high value. We prefer to find the right price / quality ratio.
If we see the x-axis (value) in front of us with the highest value at the far right and the lowest value at the far left, and then the y-axis (price) with the lowest price at the very bottom and the highest price at the very top, you are as a consumer, of course, preferably at the bottom right in the fourth quadrant. Here you get a lot of value for very little money. Human logic tells you that of course that is not possible. Because sitting in first rank for a dime, that does not exist, right?
At the top left, we pay a lot for a product that is of little value: nobody wants that. The price in the top right is still high, but we also get a lot in return. That can be a choice: I may pay a lot, but I also get something nice. The situation on the bottom left is reversed: I pay little but also get a product that is not worth much. This can also be a choice. I accept lower quality, but I also know that I save money.
The landscape is shifting
What is of crucial importance in the Eysink Smeets model - but what many retailers forget - is that such a landscape, once formed in a sector, is not static. Competitors enter or leave the market and come up with new business models that shift the landscape. If you do not adjust, the landscape shifts so that you end up in a quadrant where you do not want to be - and therefore lose customers.
When Telfort entered the telecom market in the late 1990s, it was an advantage player. The lowest price. Telfort did not guarantee quality, but leaned on the brand promise 'super cheap'. When providers such as Tele2 and Robin Mobile entered the market and fell below the price of Telfort, it was realized that the brand promise did not last. After all, only one can be the cheapest. Telfort went all out and, in addition to an affordable rate, also emphasized good quality and a flexible proposition. Nowadays the brand promise is therefore 'the best choice', as in: a good product for a good price. This prevents a possible bankruptcy.
What if Telfort had not done that? Telfort found itself in the lower left quadrant of the Eysink Smeets model: a low value for a low price. Other providers offer cheaper rates, which means that Telfort is slowly shifting upwards. It now offers little value for a high price: a guarantee on no customers.
Innovation as a catalyst
Not only price fighters are shifting a landscape in the NoCompromise model. In many industries we see that adding value to an existing service (or product) and implementing it innovations lead to a shift. Booking.com is a good example: it started a revolution by offering online hotel reservations, which you could also cancel free of charge up to 24 hours in advance. Travelers were used to having to book at expensive desks (or directly at the hotel) and then be tied to it, or to be able to reclaim a maximum of a small percentage of their paid sum if the journey was unexpectedly canceled. Booking.com transformed online reservation and free cancellation into a new standard, forcing other players to re-position themselves in the landscape. Whoever does not go away from the game board: game over. Interesting detail: Booking.com not only added that value, but also added very attractive rates. Who said again that it was not possible to be in first rank for a dime?
Ultimately, a NoCompromise landscape can be filled for every sector. In which quadrant do the different brands / retailers belong? In which direction are they moving? How close are they to the questionable upper left quadrant? Anyone who develops this view will probably feel less surprised from now on if a large, well-known retailer applies for a suspension of payment.