Anthony W. Ulwick

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Although a new market entrant is more likely to pursue a disruptive strategy, incumbents have an equal or better chance at winning with a disruptive offering if they pursue it. The problem for many companies is that it is often a less profitable strategy. Proponents have to convince management that it will defend against competitors and new market entrants. Since a company is not limited to one product, it can choose, as Uber did, to create separate products to address over-and underserved customer segments.

Employing a Discrete Strategy

A discrete strategy is employed as a separate (discrete) part of an existing product strategy: with a discrete strategy, a company takes an existing product and sells it in a unique situation that justifies a higher price. A discrete strategy is best suited for situations in which a higher-priced version of the existing product would be very welcome—or where a captive clientele cannot object. Pursuing a discrete strategy can be very profitable.

The key to a successful discrete strategy is the ability to identify situations in which the customer, in need of the company’s product, has restricted or no access to it. In such a situation, the company can justify charging a higher price for its purchase. For example, people who are unable to cash a check at a bank because they do not have a bank account have no choice but to pay high fees to cash their checks at an independent check-cashing center. Stubhub.com also capitalizes on this scarcity strategy by allowing tickets that are sold out to be re-sold/auctioned to people for what the market will pay, often at much higher-than-normal prices.

As another example, consider airline travelers who are legally prohibited from taking bottles of drinking water through security. This restriction enables concessions at the gates to employ a discrete strategy, as they are now justified in charging significantly more for water (and many other food and beverage items) to travelers. Similarly, movie theaters, sporting arenas, and theme parks restrict what

visitors can bring in and consequently are able to employ a similar strategy.

Restrictions resulting from high demand can also justify higher prices. Airlines, for example, typically charge more for seats when supply is tight. It should be noted that although employing a discrete strategy may hold the potential for high profits, it can also be viewed as exploitative by customers and result in public backlash and/or reputational damage as it did in 2016 with pharmaceutical giant Mylan over the high cost of EpiPens