Price and service: The two worst things to compete on

As a seller of things, I’ve tried to compete on price or service in the past. (“We’ve got the lowest prices” or “We’ve got the best customer service”). As a buyer, I’ve had other companies try to sell me on price or service.

It doesn’t work.

STOP TRYING TO COMPETE ON PRICE AND SERVICE

Competing on price is a dangerous game because your margins are so low that you aren’t very profitable, you can’t invest in in marketing and growth, and you attract the least loyal customers who only care about price and will leave you in a heartbeat as soon as someone else offers a lower price.

Competing on service (I mean: customer care, not the services you might sell) is just as bad but for different reasons: It’s so easy to SAY that you offer better service than your competition. However, everyone is saying it so it lacks meaning, especially since most companies that claim to offer “better” service are actually offering the exact same quality of service that everyone else is offering (even if they think they’re offering something better). And to make matters worse, customer expect flawless service from all vendors all the time as the default requirement of doing business with them. You can say you offer better service but you only truly do when you have metrics that prove it and when you make your service so ridiculously awesome that people are left weeping at how wonderful you are.

In both cases, you might be able to compete on price and service for the short term but someone will come along and out-do you.

SO WHAT SHOULD YOU DO INSTEAD?

There needs to be something else. It needs to be a competitive factor that only you can do. It needs to have a moat around it.

I like the “cluster approach” to competing: That is where you compete on a cluster of things rather than on price and/or service. You should cluster some of the following things together:

  • A target market that is more narrowly defined than your competition. For example: If you can’t sell to all the business owners in your city, why not sell to those who have started a business 5 to 10 years ago, make $100K to $320K, and are looking to expand. See how that’s different? You’re narrowing the market and that allows you to compete on expertise. (Hey, if you want to read more about this, why not check out my blog post 55 questions to answer when defining your sales funnel’s target market).
  • A great offer. Yes, your competition will probably tell you that their offer is just as great. However, the value of your offer is far more measurable (and there are far greater opportunities to innovate) than when you try to compete on service. That measurability can give you an edge if, indeed, your product is better. And the more unique your offer seems, the better.
  • Compete on the relationship (but there’s a catch). This is probably the closest thing to customer service, although there is a difference in my mind. Customer service has more to do with how you handle a customer before, during, and after the sale. A relationship is far more intimate. Your customer truly feels that you have their best interests in mind and they’ll invite you to their kid’s baseball games. (For more about this, check out my blog post Customer service and customer relationships are similar but different. Customer relationships are better). Okay, I said there was a catch and this is it: You SHOULD NOT promote yourself as offering better customer service or customer relationships. This is one of those “show don’t tell” situations. Since every business SAYS they offer great service, you can compete and succeed by being the one company that truly connects in a meaningful way to your customers.
  • A shocking guarantee. Lots of companies offer guarantees. But most of them are lame. 100%, no questions asked. Whatever. Give your guarantee some teeth. Make it a no-brainer for someone to do business with you.
  • Measurable marketing. This one might surprise most readers because we tend to think of competitiveness as being a “customer facing” aspect to our business. But you can become far more competitive by turning on the metrics and making every marketing effort more effective. It feels arduous to do, and some marketing efforts aren’t as easily measured but there’s an added bonus: You’ll sell more and save money.

Are there other things you can compete on? Of course there are. I’m only getting warmed up here. But if you start with these five, you’ll see

Customer service and customer relationships are similar but different. Here’s why customer relationships are better…

A lot of my blog posts are just my thoughts about business; my reflections about what business could and should (and shouldn’t) be.

And lately I’ve been thinking about the difference between customer service and customer relationship.

I suspect that too many businesses think they are interchangeable. But I don’t think they are.

Customer service: I tend to think of customer service as how you handle the customer before, (but especially) during, and after the sale. In many ways, customer service is transactional; it’s built around the transaction of a purchase: A customer experiences your customer service when they interact with your business — when they try to buy something, when it gets delivered to them, when they have a problem. Let’s measure customer service this way: How easy is it for a customer to get their money back when they ask for a refund?

Customer relationship: I tend to think of customer relationship as a more interactive/intimate connectedness. It’s how much your customers think of you outside of the times when they need whatever you’re selling. Customer relationship is what you do all those other times when you’re not selling. Customer relationship is not transactional at all (although it can certainly lead to more transactions). Let’s measure customer relationship this way: When was the last time your customer invited you to a barbecue or their kid’s baseball game?

HERE’S HOW CUSTOMER SERVICE AND CUSTOMER RELATIONSHIP SHOULD PLAY OUT IN YOUR BUSINESS

You should have good customer service — of course. It should be easy and enjoyable for customers to transact with you. But too many companies brag about the quality of their customer service yet never really make it special. Worse still, they don’t realize that every other business out there is also bragging about customer service (and to a customer, it all kind of looks the same). And too many companies put too much of their focus on creating positive customer service experiences and they forget about the broader customer relationship experience.

Guess what: Your ability to deliver the product or service with a smile seems exactly the same as your competitor’s ability to deliver their product or service with a smile. Your toll-free troubleshooting line seems exactly the same as your competitors’ line. Your no-questions-asked 100% money back guarantee seems exactly the same as your competitors’ guarantee.

If you want to compete on customer service, you need to be absolutely amazing in a zany “I can’t believe they’re doing that” way. You need to give the CEO’s cell-phone that she or he answers 24 hours a day even on vacation. You need to give a 200% money back guarantee. You need to not only deliver the product with a smile, you have to also deliver another free product, set them both up, and then cook the family dinner. That is the kind of customer service that you need to offer if you are going to focus on customer service: Ridiculously crazy customer service.

But likely you won’t offer that (it’s expensive and few companies do). That’s okay because you should be doing something else instead: You should be…

BUILDING A CUSTOMER RELATIONSHIP

A customer relationship is how much your customer thinks of you when they are not buying from you. It’s how often they invite you to their spouse’s birthday party or kid’s ball game.

A customer relationship is intimate. Interactive. Mutually meaningful. Sacrificial. Generous. And it needs to expand beyond the narrow confines of the conversation about your product or service.

A customer relationship looks like this: You’re a real estate agent who sold a house to a client. You also show up to help them pack boxes and put them in the back of the truck, and you pick up the tab for pizza. You send them a newsletter every quarter that doesn’t talk very much about you and your accomplishments, or even spends a lot of time talking about new houses on the market, but rather talks about the kinds of challenges and opportunities they face in their lives — raising kids, getting promoted, saving for retirement, buying a car. You stop by their house on the anniversary of their purchase every year and give them flowers or a bottle of wine. You send them birthday cards. You pay attention to their lives and call them up when something good or something bad is going on. You share your own personal challenges and wins with them. You ask a lot of questions and you savor every answer. You ask about their kid’s baseball games and you show up and cheer.

THAT is a customer relationship.

It’s the kind of interaction businesses want (although they are too busy focusing on service to realize that they’re aiming for the wrong thing).

It’s also the long game with a higher up-front cost but a very significant long-term pay-off.

Confession time. As I write this, I think of my customers and my brands. Do I have this in any of my brands? Absolutely not. I know a few things about my customers — important hobbies or spouse’s name or the number of kids… maybe. But I don’t do anything to build the relationship. So don’t read this blog post as someone who has it all together and is now meting out wisdom from atop a mountain. I’m an amateur who is chewing through my own thoughts and sharing a major failing with you.

On that note, I think I’ll sit down right now and chart out some changes in my business. I hope you’ll do the same in yours.

How to handle difficult customer service situations and bad PR

Running a business means putting yourself out there… and guess what: You’re not going to please everybody. I could fill a book with times that I’ve pissed off customers (when I was an employee and as a business owner). Of course I don’t go out of my way to do it but it happens.

Clients have expectations and they don’t always mesh with what you do. Sometimes it’s your fault; sometimes it’s not your fault.

In spite of what the customer service gurus tell you, the customer isn’t always right and it’s not always possible to bend over backwards to please the customer. Along with keeping your customers happy, you have laws to follow and a profit to make. It’s a fine line.

So when things don’t go well (regardless of who is at fault), it’s helpful to be prepared with responses to the way your customers are likely going to react. Below, I’ve drawn out a spectrum of the most likely reactions a customer might have when things go bad…

THE CUSTOMER REACTION SPECTRUM

To elaborate on the above graphic…

  • Some customers don’t know something went bad.
  • Some customers don’t care; they’re extra forgiving or the situation was just not important enough to them.
  • Some customers care but don’t act… either because it’s just easier to maintain the status quo or because they don’t like conflict or because they think the situation was a one-off and it won’t likely happen again. (There might be other reasons, too.)
  • Some customers act defensively and do something about it to make sure it doesn’t happen to them again.
  • And some customers act vindictively and take a strong stand to make sure you’re aware that the problem occurred and perhaps to warn others away. I think the word “vindictively” might be a little strong but the other word I was going to use (“offensively”) seemed worse.

This is a spectrum, meaning that there are probably degrees of severity, and each of the 5 main points on the spectrum probably have several “sub points” beneath them. For example, someone who acts defensively might just warn you. But someone else (further to the right on the spectrum but still acting defensively) might actually switch to another service provider. And someone who acts vindictively might post something negative on Yelp to warn others. But someone else (further ot the right on the spectrum but still acting vindictively) might sue you.

Your job during a potential PR disaster (or, better yet, while you are contingency planning for these situations), is to look at each of the potential customer reactions along the spectrum and figure out an appropriate response. Some customers might deserve to be compensated. Some customers might just need some communication. And you might have to have to say goodbye to some customers when you simply can’t fix the situation.

It’s important to note that customers can move left and right on this spectrum based on several factors. You need to control those factors (as much as possible; you can’t control everything, though) and do your best to keep your customers from moving too far to the right.

For example, a customer might be in the don’t care part of the spectrum until they realize how much of a problem it is. Or another example: A customer might be in the care but don’t act part of the spectrum if it happens only once. But if it happens repeatedly, they might do something about it.

External factors (often outside of your control) play a part in their reactions, too: A customer might be in the don’t know part of the spectrum until a vindictive customer tells them. Or a customer might be in the care but don’t act part of the spectrum until they discover how easy it is to switch to another service provider.

I should also mention that people move left and right on this scale at different speeds. I don’t move right very quickly but I will eventually move all the way right if necessary. I have peers, though, who seem to live on the right side of this spectrum with every single business they work with.

Okay, now that I’ve explained the spectrum, I’ll give you an example of a negative situation and the customer reactions and the I’ll talk about some of the things you might do for customers in each part of the spectrum…

AN EXAMPLE OF THE CUSTOMER REACTION SPECTRUM

A great example of a recent negative situation, and the spectrum of customer reactions that went with it, is from GoDaddy’s epic fail last month. I don’t know what happened from a technology standpoint but from their customers’ perspectives, it basically seemed like everything (email, websites) went offline for an eternity. (Read about the details from GoDaddy).

So let’s look at the customer reactions to GoDaddy’s temporary offline situation:

  • Some customers don’t know: There were likely a large number of people who didn’t even know it happened. For example, they might have been at work or on vacation or busy doing something else.
  • Some customers don’t care: There were likely a large number of people who don’t care. They shrugged it off as a risk of doing business online.
  • Some customers care but don’t act: There were likely a large number of people were impacted and annoyed or even pissed off, but didn’t act. They maybe felt it was too much hassle to switch or they feel that it probably won’t happen again.
  • Some customers act defensively: There were likely a large number of people who started looking into switching their accounts elsewhere. In fact, a number of people said so on Twitter.
  • Some customers act vindictively: The twitter posts ranged from “I’m moving my service” (which is on the upper end of defensive and on the lower end of vindictive) to things that were far worse. Some asked for compensation. Some cursed. I haven’t looked but I’m sure we could find even stronger reactions elsewhere online.

HOW TO RESPOND TO THE SPECTRUM OF REACTIONS


Sometimes it’s okay to not say anything and see if you got away with it (I’ve worked for a company that used this method all the time!!!) but it can haunt you. So for customers who don’t know, I think it’s best if you let them know proactively. Don’t let them hear it from others. Tell them what happened as concisely as possible but tell them why it’s not a big deal. That’s the most important part. Keep the statement of facts short and truthful and then elaborate on how things are going to happen going forward.


I think there are a lot of companies who ignore this group of people, and instead adopt the belief that the squeaky wheel gets the grease. But for customers who know about the situation yet don’t care, I advise that you do two things: I think you should tell them (in the same way you told the people who didn’t know) but you should also compensate them or reward them for their loyalty. This group isn’t thinking about compensation so they will be surprised to be offered something it this act of generosity can make them even more loyal because it makes you seem like someone who truly cares.


I’m alarmed at how often companies do nothing for these customers. As a consumer, I’ve received a barely sincere “our sincerest apologies” from companies who know that I’ve been inconvenienced by them. This group of people are really on the fence and could leave. This is a key group of people to reach out to. Compensate them! Reward them for their loyalty! Communicate (and even OVER-communicate) with them and let them know why the situation happened and why it will never happen again! Make them feel so special and extra smart for sticking with you while everyone else jumped ship.


This is the group, and the one that follows, often get the most attention from businesses. They’re people who are already on their way out but that loss of revenue or negative feedback becomes the squeaky wheel. Companies pour their compensation into these customers (often at the expense of ignoring all the people on the left side of the spectrum). For this group of people, compensation is definitely a need. But there are other things you can do too: You almost need to go into sales mode to explain why the situation will never happen again, and you need to remind them of the reasons that they first started with you anyway.


Like the previous group of customers, the customers in this category of customer reaction are the squeakiest of wheels. And frankly, at this point in the spectrum, it’s not likely that they are coming back to you. Offering them compensation is debatable. It had better be pretty freaking amazing to get them back, and then you’d better remember that you are “on probation” with them for a long time to come. I don’t think there is much you are going to do for these people. Additionally, your compensation has to be carefully presented because I’ve seen people in this category become indignant that the business is trying to bribe them for their silence. For these customers, I think the best thing to do is thank them for their years of service and let them go.

THE SPECTRUM WORKS FOR ANY NEGATIVE SITUATION

As a business owner, you’ll face innumerable challenges and potentially negative situations — some will be your fault, some won’t be. You can prepare by using this spectrum to anticipate customer reactions and to develop responses to each of those reactions.

61 questions to strengthen your client relationships and build loyalty

Clients have a lot of choice when it comes to selecting a real estate or financial professional to meet their needs. And just because we serve a client once doesn’t mean they’ll come back to us when they need a similar service in the future. Client loyalty is scarce.

One important way to create client loyalty is to build a relationship with them. The deeper the relationship, the more likely they’ll be to come back to you for future services. But building relationships isn’t easy – you probably have lots of clients and it’s hard to keep them all straight.

Here’s a tool that can help. It’s a simple list of questions to help you get to know your clients better. Don’t hand over this list to your clients to fill it out and don’t pepper them with all of the questions at once. In fact, not all of these questions can even be answered by the client! Answer as many questions about each client as you can. Then identify a couple of questions that you want to discover the next time you talk to them. Sometimes you can ask the question directly; other times you’ll have to communicate with your client and use clues to discover the real answer.

Use this list as a guide to understand your client better and as a foundation to build a relationship with them.

HERE’S HOW TO USE THE ANSWERS

  • Use the answers to build rapport: “Your daughter is in piano? So is my daughter. I’ll watch for you at the next recital!”
  • Use the answers to prompt future sales: For example, a child’s birthday might be good reminders to sell insurance or an adult’s birthday might be a good time to revisit their retirement fund.
  • Use the answers to start future conversations: “Hey, how did your son’s little league tournament go last weekend?”
  • Use the answers to look for referral opportunities: “If anyone in your business networking group happens to be looking for key man insurance, let them know that I specialize in insurance for small businesses.”
  • Use the answers to help you understand your clientele and shape your business accordingly: If many of your clients are young families, the products you offer might shift over time as your clients’ children age.
  • Use these answers to help you understand how to market your business: Once you have these question lists started for your clients, you can fill out the questions in the blog post 55 questions to answer when defining your sales funnel’s target market. (In fact, you’ll notice that some of the questions below are closely connected to the target market questions).

61 QUESTIONS TO ASK

  1. What is your client’s age?

  2. What is your client’s gender?

  3. What is the your client’s ethnic heritage?

  4. What language does your client speak as their primary language?

  5. Where does your client live?

  6. Who else lives at that address?

  7. What does your client do for a living?

  8. What is your client’s approximate income range?

  9. What are your client’s hobbies?

  10. What teams, leagues, groups, and associations does your client belong to?

  11. What kind of music does your client like to listen to?

  12. What kind of car does your client drive?

  13. What sports does your client follow?

  14. What kind of education does your client have?

  15. What are the things that your client aspires to do? (i.e. Climb the corporate ladder? Give their children the best opportunities?)

  16. What kind of house does your client aspire to live in?

  17. What kind of car does your client aspire to drive?

  18. If your client seems themself in a “lifestage”, what would that lifestage be?

  19. What would your client say is the next lifestage that they should move toward?

  20. How can you help them get to that next lifestage?

  21. What does your client consider to be important to them?

  22. How does your client define happiness and success?

  23. What kind of personality would describe your client?

  24. What motivates your client?

  25. What fears does your client have?

  26. What are the problems that your client wants solved in their lives?

  27. What are the challenges that your client faces in their day-to-day lives? (Unlike the above question, this question forces you to consider other challenges — even ones that your client wouldn’t define as a problem to be solved).

  28. What value does your client place on family? (i.e. more important or less important than other factors in their life).

  29. What value does your client place on friends? (i.e. more important or less important than other factors in their life).

  30. What value does your client place on their work? (i.e. more important or less important than other factors in their life).

  31. What value does your client place on recognition and status? (i.e. more important or less important than other factors in their life).

  32. What value does your client place on happiness? (i.e. more important or less important than other factors in their life).

  33. What value does your client place on fear of loss? (i.e. more important or less important than other factors in their life).

  34. What value does your client place on money? (i.e. more important or less important than other factors in their life).

  35. What value does your client place on time? (i.e. more important or less important than other factors in their life).

  36. What value does your client place on leisure time and activities? (i.e. more important or less important than other factors in their life).

  37. What value does your client place on peace of mind? (i.e. more important or less important than other factors in their life).

  38. Who influences your client?

  39. Who does your client influence?

  40. Where does your client like to spend their time?

  41. What are the most important purchases to your client?

  42. If your client had an extra $100, what would they spend it on? What if they had an extra $1000? What if they won $1 million dollars?

  43. If your client had a week where they had no work-related commitments, what would they do? Where would they go? Who would they go with?

  44. What are the top 10 tasks that fill the to-do lists of your client?

  45. How does your client define the problem that you solve or the need that you fulfill? (i.e., What words to they use? What “symptoms” trigger a search for a solution? Check out this blog post, which gives a closer look at the Audience stage.)

  46. What does your client consider to be risky? (Time, effort, money, and reputation are the big ones)

  47. Who will your client have to face if they buy your product or service and it doesn’t meet their needs?

  48. What other alternatives does your client have to solve their problem or fulfill their need? (Be sure to include competitors’ products and services as well as alternate offerings that aren’t direct competitors but still solve the problem. And don’t forget: Do nothing is also an alternative!)

  49. What reasons would your client give for not purchasing your product or service?

  50. How familiar is your client with the solution you’re offering? (i.e., is it entirely new and requires a lot of explaining or is it a very familiar solution?)

  51. How is your client changing? (i.e., what answers to this list of questions will be different next year or in the next decade, and why?)

  52. Does your client have a spouse? What is his/her name and age?

  53. What is your client’s spouse’s hobbies?

  54. Does your client have any children? How many? What are their names and ages?

  55. What activities do your client’s children take part in?

  56. What products/services has your client bought from you in the past?

  57. What products/services has your client bought from your competitors in the past?

  58. What products/services is your client most likely to buy next from you?

  59. What would your client say is the most important reason that he/she uses your services?

  60. What would it take to get your client to switch service providers and get the same service you offer but from someone else?

  61. What would it take to lock your client in to working exclusively with you for the rest of their lives?

How insurance brokers can cultivate loyalty in their customers

If you drive down the average street of the average city in North America, you’re going to pass several insurance broker offices, each offering basically the same service to the same clientele at the same price.

True, a broker might be able to identify a few key areas where their business offered insurance products that were different than their competitors were offering (especially if the broker used competitive analysis to study the competition) but I promise you that most of your customers couldn’t tell you apart from the other brokers on the street.

In many cases, customers simply go back to their broker’s office out of habit or because no where else seems to be any better.

But what would happen if a new and innovative insurance broker shows up on the block? One who opens early, stays open late, has a play area in the office for the kids, and offers Starbucks coffee for the grown-ups? Those small differences might only be surface differences but they could be enough to steal the customer away from you. (“Convenience AND coffee? Sure, I’d give that a try. What difference does it make?”)

What insurance brokers should really use to attract and retain their customers has absolutely nothing to do with tiny, meaningless innovations. What insurance brokers really want is:

  • Loyal customers who wouldn’t be tempted away by the hours/play-structure/coffee.
  • Loyal customers who would drive across town to buy from you instead of a broker closer to where they live.
  • Loyal customers would become evangelists and tell their friends and family to buy insurance from you.

How can you achieve this?

Let’s forget about getting new customers in the door. That’s a post for another day. It will happen, too, when your loyal customers tell their friends and family about you.

Instead, let’s focus on the clients you have. Since you can’t compete on price or product, the most important thing you can possibly do is build a relationship with your clients.

I don’t mean a relationship where you send them an annual form-letter reminder every year (like this insurance broker does to me each year). I mean a real relationship — where you know what your clients’ kids’ names are by memory and your clients are interested in knowing what YOUR kids’ names are.

I’m talking about a relationship so meaningful that they invite you for coffee with them… just because it’s nice to hang out with you.

I’m talking about a relationship so meaningful that they don’t think of you as “an insurance broker” but “a friend… oh, he’s also ‘my insurance guy’.”

I’m talking about a relationship so meaningful that if you go to the hospital, your clients come visit you. (That’s what happened to my friend who works at a Starbucks. His customers visited him when he had to go in for surgery).

You don’t have to spend a lot of money on this kind of relationship but you do need to invest some time and energy.

Get to know your clients. Connect with them. Don’t use every connecting opportunity to sell insurance to them. Instead, build a true relationship. Build enough trust that you are one of the first calls when a major life event happens (a wedding, a birth, a death, a car accident, a new house)… whether or not that major life event will require more insurance. Build enough trust that they call just because you’re THAT important to them.

Here are some additional ideas and suggestions:

  • Give your cell phone number out. People like knowing that they can reach you any time even if they probably won’t call.
  • Find out what their kids’ names are. If their kids play a sport, show up to a tournament.
  • Find out where your client works and what their aspirations are.
  • Find out what your client is interested in and take an interest. Send them a link; clip a magazine article; ask a local event related to their interest (or tell them that you’re going to attend the event and would they like to come along).
  • Connect with them on social networks. (Don’t talk about business there!)
  • Encourage your clients to ask for you by name when they show up to your office. Tell your staff to get you when the show up. Yes, you’ll barely be at your desk but that’s a good thing!
  • Train your staff to recognize clients when they walk in the door.
  • Mail something regularly to your customers that doesn’t involve reminding them that they owe you money.

I’m just scratching the surface here. There is so much you can do to build relationships.

It all starts by considering these clients your friends.

Build a friendship and it won’t matter what kind of broker office opens up closer to their home with more convenient hours… they’ll call you up for coffee and a policy renewal, and they’ll invite along a friend who also needs insurance.