Traditionally, it is believed that a company can either create great value for consumers at high costs, or create reasonable value but at low costs. The choice between differentiation and low costs is considered. The adherents of our strategy set the task of achieving both at the same time.
Consider Cirque du Soleil. During the company's debut, other circuses were engaged in comparing themselves to competitors and tweaking traditional circus programs. To do this, they tried to attract the most famous clowns and lion tamers. The result is an increase in costs that does not bring an increase in income.
Cirque du Soleil came up with the best solution to the problem - creating a more fun and engaging circus. He brought people circus fun, intellectual depth and treasures of theatrical artistry. Having broken the market boundaries of theater and circus, Cirque du Soleil attracted not only children, but also adults, theater lovers. This led to the creation of a new market space.
Previously, no one asked the question of the relevance of traditional views. The participation of animals in the performances generated more and more public discontent. The costs of keeping animals were also high. The whole attraction of the circus came down to the marquee, clowns and classic circus acts.
Cirque du Soleil has kept the clowns, but their humor has become more subtle and light. The tent has become comfortable. Acrobatic and other exciting performances began to play a lesser role. Cirque du Soleil introduced a storyline, and with it intellectual richness, artistic music and dance, a variety of productions. Similar to Broadway shows, every Cirque du Soleil show has a suitable musical accompaniment.
Cirque du Soleil has managed to create more sophisticated performances. Moreover, the performances became diverse, people started going to the circus more often. As a result, the best that is in the circus and in the theater was proposed, and all other elements are minimized or reduced to zero. By ditching many of the more expensive parts of the circus, the company has been able to dramatically reduce its costs. Cirque du Soleil has taken a strategic step by bringing its ticket prices closer to theatrical ones. The price of tickets was several times higher than the usual circus ones, but at the same time the prices turned out to be attractive for adult spectators. This is how we arrived at the value innovation strategy. People were willing to pay for the offered price.
Cost reduction occurs due to the elimination and reduction of the factors for which there is competition in a particular industry. Costs become even lower over time due to economies of scale due to high sales volumes generated by ideal value. Standard companies have a predefined industry structure, they compete within the established framework. The new circus, on the other hand, went beyond and created a space in which there are no competitors.