Low Cost, High Value

The most important innovation in recent years

As an expert, I am often asked about ‘the most important innovation in recent years’, understood as business model innovation instead of research and development. This is a complex question which has more than one answer. My choice is particularly clear; probably one of the best innovations has one of the worst names: Low Cost.

Many of us have discovered ‘low cost’ as a result of low cost airlines. I started to be interested in this topic after an interview to the CEO of Ryanair, Michael O´Leary, which I read 10 years ago; in that interview O´Leary announced that in 2015 we would travel without paying for the ticket.

10 years later, this announcement aroused my curiosity so deeply that in Loop we decided to develop an experimental project in order to be able to understand the scope and the reasons for those statements; the project received the name ‘new neighbours’ and it developed a scenario in which Ryanair joined the cities of Reus and Edinburgh by a low-cost flight. The hypothesis of the project consisted of analyzing the economic flows developed between the new neighbours, Reus and Edinburgh; the emerging scenarios, their business possibilities, the network of relevant actors, their interests and the impact that all this had on Ryanair’s income.

It was a great revelation; we learnt that low cost was synonym of essential value, collaboration business and benefit distribution and client development were closely connected. We began to weigh up the authentic transforming power of this concept and to apply it in company/client ‘win-win’ projects; one of the first projects was for the multinational French company JCDecaux; then we developed several projects that adjust the real value of what they offer and develop new synergies among partners.

As every other aspect in life, concepts can be applied with a greater or a lower level of ethic and low cost is not exempt from that; I am particularly interested in those applied ethically. Low cost is a synonym of fair price, of focusing on the real value of things, of not over specifying services or products as a result of the lack of real value. It is also a synonym of social evolution, consumption democratization and a world of possibilities both for the consumer and for the developer and marketer. Undoubtedly, air low cost is one of the concepts that have most changed society in the recent years.

For some people, low cost is also a synonym of unfair competition, corporate dumping or boundless and unsustainable consumption; I particularly disagree on it. I believe that low cost is a synonym of the degree of evolution intelligence we have as consumers, of our strength and power as well (these statements have led me to some arguments with politicians). As every rupture change, its assimilation is not easy and it causes movements in the system, bad uses and practices as well, but once they are assimilated, the benefit and the evolution for the society is great.

Today the concept of low cost is found in the DNA of several business models; paying the fair price in search of mutual benefit (company/client) is the basis of retail textile business, merchant banks, travel agencies, food, cars, etc.

Low cost has found in technology an excellent ally and it is one of the basic elements for the development of concepts such as 2.0 webs or collaboration portals. Models like Infojobs turn clients (advertisers) into active business actors, making an impact on profitability for some people and low cost for others. Some people may think that low cost has nothing to do with this type of business; I am completely sure that without the first the latter would never exist in the current format.

This age of crisis is bringing us new low cost models, portals which are badly called ‘bargain sale’ or brand outlets such as Venta privé, Privalia or Buy Vip are a clear example of this; they have actually managed to establish new commercial channels and ways of contact with the most reliable and loyal clients; as well as it happens with on-site outlets of Village type, which have become new tourist destinations and entertainers of depressed areas.

Low cost has changed our lives; without this concept we would not be willing to carry boxes in furniture shops, to develop certain activities in bank branches or to assemble an increasing percentage of the products we buy, but our life would probably be more basic and more class-differentiated.

Low cost has also developed premium products, it has given a raison d’être to them and it has managed to cause a big mass of consumers to appreciate them, aspiring to more sophisticated consumption.

Whoever thinks that outlets, bargains, cheap flights, etc. will disappear after the crisis is wrong, to my mind. Welcome to a new age of consumption in which low cost will imbue everything that lacks a differential value and where classical targets of consumers will go down in history.

 

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Mª Luisa Vives – Jaime Gross

Welcome! from Loop want to share our projects, our vision, our way of doing things, the success of our customers, our news and those who might be of your interest. In this blog you will find notes on methodology, step by step procedures, tools, techniques, news, case studies, lessons learned, thoughts on creating new business models and above all our enthusiasm for contributing to the success of our customers, which is our success.

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