Aaron Hoos

When I was in high school, my friend’s family owned the very first computer store in town. I was always sort of impressed that they had a lock on that market. I imagined a business without competition to be the highest level of business achievement – a sort of entrepreneurial nirvana.

Then, to my surprise, I learned that they were helping someone else start a computer store in the same town. In other words, they were helping to create their own competition! I didn’t understand it at all. When I asked my friend’s dad about it, he said that competition is good for business. Although he didn’t go into detail, it was a lesson I never forgot (I even remember the exact moment when he told me – it was in the kitchen of their house – it was a watershed moment for me).

It took me years to learn why competition is a good thing, but I now realize that it is essential to a strong, prosperous business. Here are my top 6 reasons why I embrace competition:

REASON #1: COMPETITORS DEFINE YOUR BUSINESS

Competitors help you to figure out what you do. If you are starting a business and you examine how your competitors define themselves, you can identify a point of difference that they are not addressing.

It’s like being lost and using a couple of fixed objects to help you figure out where you are. Your competitors are those fixed objects and you can easily find your way in the marketplace when you compare yourself to your competition.

Creating a business that has too much identical competition (everyone sells exactly the same thing at exactly the same price – real estate agents are a good example) will eventually result in a price war with your competitors. But if you look at your competitors as a starting point and then you define yourself carefully, strategically, and in a different way from the rest of the pack, you’ll help to attract the right people to your business (people who might not be attracted to your competitor). You won’t have to compete on price because your competitors are different from you.

For more information about differentiation and competition, read my blog posts: Equal is not good enough and Mine is bigger than yours — competitiveness and marketing content.

REASON #2: COMPETITORS KEEP YOU HUNGRY

A couple of years ago, I met someone who owned a business that was in-demand and the only kind like it in the entire state. The guy charged insanely high prices and 100% interest on unpaid debts. He could make his own schedule and he didn’t need to provide good customer service. Sounds awesome, at first – you can do what you want and you basically have a licence to print money. But eventually, some other entrepreneur will spot the opportunity in that market and see that he or she could make a financial killing while charging less AND providing exemplary service… and suddenly the first guy’s business is in trouble.

When I was a freelance writer, I would sometimes get frustrated at the low-priced freelancer writers who would charge next-to-nothing, undercutting my prices. On more than one occasion, it caused me to look at my prices and sometimes consider lowering them. (Fortunately, I never did). I realize now that those low-priced competitors kept me hungry and I worked harder to out-work and out-earn those competitors. I’m glad for them now.

REASON #3: COMPETITORS COMPEL INNOVATION

In economics, inflation is kind of like a swarm of termites. You don’t see them but they eat away at the stuff you own. Inflation causes upward pressure on prices so that $1.00 tomorrow is worth less than $1.00 today. In other words, if you’re standing still in your finances, you’re actually going backwards.

It’s the same in business. If you want to create a product or service, build a sales funnel, automate it, and then go sip margaritas on a beach, think again. Your business is “standing still” (not innovating) and your competition will outpace you with newer, faster, shinier products and services. While you’re asking the lifeguard to put sunscreen on the places where you can’t reach, your competitors will be inventing a better mousetrap. Before you know it, your business will sputter and die because no one wants your clumsy old offering.

Your competitors are innovating, so you need to as well. Their very existence forces you to get creative, invest in your business, and reach for more. That’s great for your customers and for your business’ longevity. Read more about innovation at my blog post: My best advice on innovation. And this blog post provides an interesting take on innovation: Want a competitive advantage? Offer the same products as everyone else!

REASON #4: COMPETITORS BECOME CASE STUDIES

In your own business, every interaction in your sales funnel is a piece of data that you can analyze to make your business better. You watch for patterns, for sudden changes, and for opportunities. You put all of these pieces together, you compare it with your metrics, and you can make huge, positive changes in your business.

But if you raise your head out of your sales funnel for a moment and glance across the street at your competition, you’ll learn quite a bit, too. Yes, you won’t have all of the facts or metrics, but you can put together an awful lot just by looking in their windows, browsing their website, mystery shopping them, and listening to both happy and disaffected customers.

Watch for competitors’ marketing campaigns that have a huge impact. Analyze the types of people going through your competitors’ doors. Find patterns among the disaffected customers who decide to switch providers and buy from you instead. By simply watching your competitor, you can learn so much from them to benefit your own business. They become a living, breathing MBA case study to make you a smarter entrepreneur.

Want a place to start? Why not do some really simple competitive research to figure out how to price your products or services. Learn more about it at this blog post: How to easily discover the best price for your product or service.

REASON #5: COMPETITORS RAISE MARKET AWARENESS

Imagine a town in which there are only two companies providing window cleaning services. They both market their services aggressively and have their own point of difference. Simply by advertising the benefit of cleaner windows, they highlight the problem of dirty windows in the market’s mind and the market will search for a window cleaning company – even if it’s not the one whose advertising initially prompted their awareness.

It’s the principle of 1+1=3. Competitors’ marketing will attract new Leads (and sometimes YOUR Leads) to the competitor, but it will also alert the general marketplace to the general problem or need. People from the marketplace will look for a solution or fulfillment and may end up in your sales funnel as a result (all because they became aware of the problem or need from your competitor’s ad). Note: I’m not suggesting that you don’t leave all of the marketing to your competition. However, I think that competitors who advertise in the same market will have a greater cumulative effect than if they each advertised in their own market).

REASON #6: COMPETITORS CAN BECOME COOPERATORS

I love motorsports, especially NASCAR. One of the things that makes the sport great is when two competitors will work together to push ahead of everyone else. Overall, they are still ruthless competitors, but for a brief moment they can put aside their differences to eliminate the rest of the competition.

The same thing can happen in business, too. You can work together with a few carefully chosen competitors to win more customers and outpace other competitors. Now, please note: There are laws about collusion and I’m not suggesting you circumvent those laws – you’re not doing this to raise prices across the board or to destroy a few competitors. There are ways to legally cooperate with your competitors for mutual benefit. For example, you can share the costs of joint advertising to reach different markets through the same channels. Or, you can send each other potential customers who may be a better fit for the other than for you. When I was a freelance writer, I competed against other freelance writers, of course. But when a Prospect wanted to buy from me and I discovered that they were not a good fit (perhaps I didn’t have the bandwidth to help them, or maybe they were in an industry I knew nothing about), I had a few carefully chosen competitors who I felt comfortable recommending them to. And the relationship worked both ways – those competitors knew who I was interested in working with and they would send people to me.

WHAT THIS MEANS FOR YOU

First, welcome competition. If there are no competitors in your marketplace, be wary. Dare to invite competitors to your marketplace! Get to know your competition as individuals, but also get to know their businesses. Use competitive analysis to learn as much as you can about them. Find out how you can help them (and take the first step to do so) and you may see some reciprocation. And always keep an eye on your competition to motivate you to stay hungry and stay innovative!

Hey, this blog post gives another reason to love competitors: 4 ways to insert yourself into your competitor’s sales funnel and steal their customers.

It’s that time of year again… when the broker that handles my house insurance pisses me off by sending me a letter reminding me of what bad customer service is.

The letter reads:

Dear Aaron:

Re: Policy xxxxxxxxxxxx

I am pleased to offer renewal of your policy which presently expires on April 15, 2011. The information I have on file would suggest coverage of at least $xxxxxxxx on your dwelling this year. Based on this amount, the premium for renewal is $xxxx.

You currently have $xxxx sewer back up coverage. If you have installed a sump pump and back flow value you are eligible to increase this limit. Please call me at your convenience to discuss this.

I recommend that you review your current policy, taking note that there are limits of insurance for unscheduled items such as jewellery, furs, bikes, stamp and coin collections, etc.

xxxxx is a full service insurance office insuring homes, cottages, apartments, condominiums, boats and motors, aircraft and all classes of business as well as AUTOPAC and TRAVEL insurance.

I look forward to hearing from you soon.

Sincerely

xxxxxxxx

We are now on the web. Visit us online at xxx.xxxxxxxxxxx.xxx

Let’s ignore the grammatical errors in the letter and the redundancies in the PS.

Here are some of the problems I have with this letter:

1. In paragraph 1, they start out with the amount that I owe. Boom. Like a slap in the face. The way it’s positioned reminds me that our relationship is based on money. I am just a policy payment to them. (That may be true for many businesses, but customers don’t want to feel that way).
2. In paragraph 2 and paragraph 3, they remind me of how they are limiting coverage. After they’ve asked for my money. :(
3. In paragraph 4, they tell me they are a “full service” company and then they list their products. After reminding me how much I am paying them and telling me how much they are limiting my coverage, this 4th paragraph is a too-little, too-late attempt to get me to buy more coverage from them.

It’s really not the letter itself that pisses me off, I guess. Rather, it’s what this letter stands for: I don’t actually feel like a customer. I am a policy and an annual policy payment.

They shouldn’t be surprised that I have absolutely no loyalty to them. They have done nothing to win my loyalty. And I’m sure I’m not alone. This isn’t a problem with this specific broker alone; it’s a problem that is common in the insurance industry.

Here’s what I would recommend if they wanted to know how to keep me as a customer:

• Start the letter by telling me that I’m a valued customer.
• Rather than just sending me an invoice disguised as a letter, why not send me a real letter (a friendly one) with an invoice. Separate the pain and use the letter to make me feel special.
• Remind me about what I am getting. Insurance is one of those tricky sales because you pay but don’t actually see the benefit until something bad happens. However, that coverage is still a tangible, quantifiable thing and it should be highlighted in the letter so it feels like I actually “got something” for my money. (Got something other than “screwed”, which is how a lot of people feel when they pay for insurance).
• I understand that you are probably required by law to mention coverage limits. However, this can be done in a nicer way, and it doesn’t have to take up 2 of your 4-paragraphs. (If you take my earlier advice and send an invoice with the letter, include it on the invoice).
• Send some free information. There’s a lot of info out there and, as a homeowner, I would love to know more. Maybe send me something that not only benefits me but could also benefit you down the road. For example, why not send a few helpful how-to brochures produced in conjunction with a local home improvement store about how to improve the value of my home. (Heck, why not throw in a coupon for 25% off a can of paint?) I end up with some ideas to make my home better, and next year you can talk to me about how my higher-valued home needs more insurance.
• If you are going to limit my coverage, at least tell me what I can do about it. I’m sure there are extension policies that can be purchased for all of the fur coats I own (or whatever). Or, if I’m worried that my fur coats might not be covered, why not suggest a fur storage place in town (and set up a reciprocal customer agreement with kickbacks) where my fur coats will be safe and insured. (BTW, I don’t actually own any fur coats. That’s not how I roll).

That’s what I would suggest for the letter. Now here’s what I would suggest in general if they ever asked about how to make me a loyal customer:

• If you want to win my loyalty, you need to remind me over and over why I’m a customer. It’s NOT because you’re “a full service insurance company”. Rather, it’s because I think my house is awesome and I want to protect it.
• Pick up the phone and give me a call a couple of times through the year. Touch base. Keep it friendly. Ask about the wife and the business. When I mention that I’m traveling to the UK, it’s okay to casually mention that you have travel insurance. But keep those offers casual and relevant. There’s a reason that, in the past 7 years I’ve had my house insurance with you, I have never EVER thought of asking you to provide my life insurance or business insurance. It never crossed my mind
• Send something a couple of times a year. Nothing extravagant. Flowers. A card. A calendar. A fridge magnet. Even information is nice (and probably costs you less but would be more highly valued by me if it were carefully chosen). I don’t mean that this should be all about free gifts; rather, I’m trying to suggest that you add value and remind me that I’m more than a policy. (You could have sent a bottle of sparkling non-alcoholic wine when I first bought my house insurance from them, by the way).

Every day on TV we see commercials for insurance companies who are battling with each other over price. Each one claims to offer lower prices than the last. There’s a reason that they are fighting about price. It’s because everything else about their companies are so similar and they haven’t been able to differentiate themselves in any other way. This is true not only for insurance companies but for the brokers who sell their policies.

And to my insurance company: The check is in the mail. But it could be the last.

A friend of mine works at a Starbucks not too far from my house. I’ve known him for several years and he became a barista at Starbucks maybe a year or two ago.

Well, earlier this week he was rushed to the hospital because his lung collapsed. He’s been at the hospital ever since, sometimes returning home but frequently staying at the hospital overnight for observation. He seems to be doing okay, although we’re not yet sure why his lung collapsed.

Now here’s what shocked me: I just found out today that some of his Starbucks customers came to visit him in the hospital.

That’s impressive customer loyalty! In fact, that goes beyond customer loyalty to a true relationship!

Loyal customers are profitable customers. They buy again and again with very little prompting, and they talk up the business to others.

HOW CUSTOMER LOYALTY IS CREATED
I’ve found that creating customer loyalty is rarely something that happens at the business level. It happens at the employee level. Customers may become loyal to businesses (and a lot of Starbucks customers are loyal to Starbucks!), but customers more frequently and more easily become loyal to the people in those businesses.

So, are you helping your employees create customer loyalty?

• Give your employees the freedom to stop and chat with customers. By comparison, a lot of retail-based companies take the approach “if you have time to lean, you have time to clean”, and their staff rush around cleaning instead of pausing for a moment to strike up a conversation with a customer. The downside is that your employees might not get that counter as clean as you’d like it. The upside is higher profitability from customers who feel that they have a relationship with the person behind the counter.
• Give your employees the tools to strike up a meaningful conversation and build a relationship. Not everyone is socially savvy, so a few conversation starters is a good way to help your employees.
• Give your employees the freedom to go the extra mile for customers. They do anyway (everyone learns how to game the system to give a little extra to those extra-special customers) so why not help them by giving them lots of ideas.
• Give your employees the authority to fix mistakes. Nothing takes away from loyalty-building like an employee who says, “I have to call my manager to fix that for you.” Help them know what challenges they will likely face and what an adequate response those challenges might be, then give them the authority to fix it.
• Give your employees a reason to be proud of the company they work for. Do good things; make a good product; strive for high quality; smile a little and try to brighten your employees’ days.

When you have employees who love where they work and are empowered to fix things and have the freedom to build relationships, they will create massive amounts of customer loyalty.

THERE ARE RISKS TO CREATING CUSTOMER LOYALTY
There’s are risks that comes with this employee-specific customer loyalty, and I think that employers are so afraid of the risks that they skip the loyalty-creating ideas I’ve listed above.

The risks include:

• Employees who create customer loyalty and are empowered to do so become more marketable and therefore potentially less loyal to an employer.
• Customers who are loyal to employees may move with an employee if that employee quits and moves to a new business. We see this happening in industries like beautician/hairdressing, where someone moves to a different salon and advertises that old customers are welcome at the new salon.
• Employees could abuse the additional freedom (intended for relationship-building) or authority (intended to fix problems).

These are risks, but the downside created by these risks can be mitigated with fair pay, empowering management, and an enjoyable work environment. Sometimes you will get employees leaving, customers following them, and employees abusing the system. But more often than not, you’ll get customers who become fiercely loyal to the employees who serve them.

How loyal are your customers? Are they so loyal that they would visit one of your employees in the hospital?

I hurt my back this fall while playing sports. At first I thought I could just walk it off or ice it, but it persisted: I could barely walk, I could barely sit, and I slept with great discomfort. Fortunately, the doctor gave me some pretty serious meds which, along with some careful exercises, got me to normal.

During the couple of weeks that I was recovering, I noticed something pretty surprising: We use our back for basically everything. Now, maybe that sounds funny to some of you, but it’s something I always took for granted before. I’ve always been in generally good health and only had one minor broken bone, so I never paid much attention to what parts were at work when I was performing various tasks. But once I pulled some muscles all down one side of my back, it became quickly apparent exactly how much my back is involved in everything I do. Even while I sleep, my back is the supporting framework for my body, keeping everything where it should be.

Now, I can stub a toe or get a headache, and I can continue to function without a lot of disruption, and only that part of my body hurts. But when I hurt my back, it was noticeable all the time because of the central role my back plays.

In the same way, your business’ sales funnel should be the “back” of your business! It should be the framework or central element around which your entire business is built. Now, lots of businesses will build their business around an idea or a tagline or a brand. These are important elements, but on their own they do not produce a sale. They are merely tools and resources in a business.

Rather, the one and only part of a business that is as critical to the function of your business as your back is to the function of your body is your sales funnel. Your sales funnel brings in leads and propels people through until they become customers, depositing revenue into your business, which pay the bills and contribute to your profit.

You can take away the idea or the tagline or the brand and you will still have a business. It might not be as attractive or as successful, but you can still operate. However, if you take away your sales funnel, you have nothing. You do not have a business!

So, how should you build your sales business around your sales funnel?

If you are just starting out in business, the answer is easy: With the help of competitive research and strategic planning, you can create a sales funnel that works smoothly and effectively to quickly move contacts through toward a profitable sale. Spend a lot of time and resources up-front to create your sales funnel. Once you have your sales funnel in place, add the other elements in: Tie in marketing across each stage in the sales funnel. Tie in sales activities in the prospects stage of the sales funnel. Tie in customer service activities across each stage in the sales funnel. Tie in purchase fulfillment and accounts receivables at the point where your prospects become customers. Tie in accounts payables and administration to each stage. Tie in Human Resources to all stages, too, so that they are hiring staff according to the activities that need to be performed at each stage.

If you are already running a business and you realize you need to create a sales funnel because you don’t really have one that is strategically designed, you’ll have to retrofit it. That’s okay, I’ll show you how to do it but you’ll have to come back tomorrow to read how!

Your sales funnel is the most important asset in your business (and yet, it’s one of the most overlooked aspects in many businesses, too!).

With a fast flowing, well-connected sales funnel, you’ll sell more products or services in less time and at less cost, resulting in higher revenue and higher profit. No other part of your business has as much significance on the survival of your business than your sales funnel.

When you understand and master your sales funnel, you create new opportunities to:

• Focus your various marketing and social media efforts on the most promising areas (without wasting time or money on marketing that delivers zero business benefit).
• Reduce your lead generation effort while increasing the quality and quantity of leads.
• Qualify your prospects faster and more accurately and send through the best prospects (while making money even on the ones who don’t qualify).
• Sell more — and more often — to customers who turn into eager evangelists; increase cash flow and profit.
• Reduce your expenses by focusing on only the most effective marketing and selling efforts.
• Automate your business to save effort and to allow you to put your focus elsewhere on your business.

And that’s not all. A sales funnel should be the backbone of your business, from which all other aspects of your business spring forth. Your sales should be tied into your sales funnel (which might sound like a funny statement, but many businesses aren’t set up that way). Your marketing should be tied into your sales funnel. Your customer service efforts should b tied into your sales funnel. Your accounting should be tied into your sales funnel. Everything your business does should be done with the sales funnel in mind.

When that happens — when you start with a sales funnel and move outward — you create a tightly integrated, low-cost, high profit business model that is focused on results.