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

Aaron Hoos’ weekly reading list: ‘Branding, e-newsletter value, and video marketing’ edition

Aaron Hoos: Weekly reading list

Here are some of the things I’m reading this week…

  • Does the value of e-newsletters diminish over time?. Larry Keltto writes a very interesting blog post about e-newsletters, and then he performs an experiment on his own list to determine the answer. I love that he brings in some real metrics to support his conclusion that (spoiler alert) the newer the subscriber, the more active they are. This is true in other forms of selling as well. The lesson here: Make more offers at the beginning.
  • The ABCs of branding: RCD. Brand Insight Blog delivered a really compelling post about three key components required for a great brand — Relevance, Credibility, and Differentiation. (You know I love writing about differentiation!). What struck me about this post was that each of these components have an attraction quality and a retention quality to them, which means you need to really build an “RCD” brand if you want to effectively attract new customers and keep current ones.
  • Video marketing via Facebook. I have been paying attention to videos, video production, and video marketing because I see it as a key trend that will continue to rise for the near future. But how do you use it effectively? This case study by Marketing Sherpa outlined how one company in Dallas is combining video marketing and social media and saw a 30% increase in the results they were measuring. Impressive!

Financial advisor article published at Agent eNews: Develop an expert status that attracts your target market

I’m co-writing a series of articles for financial professionals, along with my colleague Rosemary Smyth, an international coach to financial advisors.

One of our articles was posted at the Agent eNews. The article explains the importance of an expert status in differentiating advisors from their many competitors.

Check out the article at the link below:

Develop an expert status that attracts your target market

How to eliminate marketplace saturation

I was asked a really good question on a forum and I wanted to share that question here. Given the subject matter of the forum, I wasn’t able to get into all the specifics but I have a little more space on my blog to talk about it.

So here’s the deal: Saturation is a concern that businesses have. They’re worried that there will simply be too many competitors in the marketplace. In the forum I was on, it was one freelance writer concerned that there would be too many other freelance writers but of course that’s not the only place where saturation is a concern. I’ve heard of book authors and SEO firms and foreclosure consultants all concerned about saturation; I’ve worried about it in a number of industries I’ve worked in as well.

But here’s the thing to remember: Saturation is only a problem when you are exactly the same as the majority of other competitors. If you offer the same freelance writing services as 100,000 other people then saturation is a problem because you’re competing against 100,000 other people. Your prospect will be overwhelmed by 100,001 proposals and pitches and resumes and C.V.’s all touting superiority (but demonstrating similarity).

If you want to avoid saturation, you need to make one simple tweak: You need to differentiate your business. Identify a smaller group of prospects (perhaps a subset of the larger group that your competitors are fighting for, or a completely different group that is overlooked by your competitors) and focus your offering exclusively on the needs of that group.

You’ll sell more because your marketing communication is focused on that group and your product is more in sync with what they are looking for. You’ll reduce or eliminate the competition because they’re all scrambling against many other competitors or a big group while you are connecting in a more relevant way with a smaller group.

The idea of something versus the reality: This HUGE problem is like an anchor on your business (but it’s also an opportunity)

I recently posted on Facebook that I wished I liked pesto as much as I like the idea of pesto. Pesto sauce on pasta sounds so good but I’ve never had a pesto I enjoyed; I always leave the table disappointed, regardless of how skilled the chef was who prepared the meal. But I look at pesto recipes and I order it restaurants anyway.

We all have that feeling about different aspects of our lives: We are caught between the idea of something and the thing itself, and those aren’t always the same. Often, the idea is much rosier than the reality.

This reminds me of a saying I heard once that “people don’t want to write a book, they want to have written a book”. There’s a distinction here between the idea of having written a book and the reality of having to write a book. Any author will tell you that it’s a painful process to write a book and people discover that when they try. (By the way, I tried to find the source of the saying but can’t find it; so if you know, please contact me so I can update this blog post).

Many of my real estate investing clients see this when they mentor aspiring real estate investors. People come to them with a desire to learn how to invest but few actually act on it because they perceive a ton of risk and the challenges of navigating through the unknown is so difficult for them that they fail to act. Once again, people like the idea of being real estate investors but they don’t like the reality of real estate investing.

And among novice equity investors we see something similar: People love the idea of being edge-of-the-seat investors who accept risk and are rewarded handsomely but in reality people hate it and they stick their money under a mattress or in a a low-risk, low-return fund. (But there’s tension between the idea and the reality, which is why sometimes some people choose the crappiest investment imaginable because their neighbor’s friend knows someone who made some money in the stock a few years ago — even if those people are usually risk averse. It’s because the idea of being risk-loving is appealing).

Buyer’s remorse might be a related result: We like the idea of owning something more than the reality of actually owning it, which we only discover after having paid for it.

I suspect we also see it in other areas of our lives: Relationships, home ownership, political and religious positions, hobbies, entertainment.

WHY THE DISPARITY?

We see this disparity between the idea of something and the much less enjoyable reality. But why does it happen, and why does it happen so consistently in so many areas of our lives?

I’m just guessing, of course, but I believe we can draw a clue from two of the examples I gave above — the example of writing a book and the example of being a real estate investor.

In both cases, the result (from which we draw our rose-colored ideal) is rewarding. With a book, the end result is that you have “proof” that you are an authority on a topic and it’s packaged into a coherent, nice-looking book worthy of becoming a New York Times bestseller; it’s something you can point to as an enviable accomplishment. With a real estate deal, the end result is that you have an asset that is generating regular monthly rental income while you sit back and light cigars with $100 bills.

But in both cases, the way to get there (from which we realize the harsh reality of the situation) is much more difficult. A book takes a lot of time and effort — time and effort that needs to come from somewhere else in our already-packed schedules — and you’ll be surprised at how hard it is to write 100,000 words on a topic and maintain coherence all the way through. With a real estate deal, the way to get there seems complicated with steps that require financial investment and a bit of sales ability and TON of rejection.

In all cases, the idea is an attractive end-result while the reality is a lot of hard work (or financial expense or time required) to get there.

So people avoid the work or they work around it or try to do half-assed solutions that minimize the work (unfortunately, this can often lead to even less satisfying results).

HOW THIS IS AN OPPORTUNITY FOR YOUR BUSINESS

You can build off of this idea-versus-reality disparity to grow your business in the following ways:

  • Identify the ideas that people have in which the reality is too difficult for them to achieve… and sell a product or service that delivers the dream and allows them to avoid the harsh reality. (This is why there are lots of freelance ghostwriters who are hired out to write books for clients, and it’s why there are so many real estate investing mentors out there who are making big bucks showing other people how to invest).
  • When faced with do-it-yourselfers who think they can ignore or ameliorate their problems rather than pay for a solution, outline the true costs of those decisions as part of your sales funnel in order to illustrate how the DIY option is the challenging reality.
  • When competing against low-priced competition, position your offering as being a fuller solution that completely eliminates all headaches and costs associated with the problem it solves. (In other words, your solution offers a clearer way to get the idea and avoid the reality than your low-cost competitor).
  • After people have bought from you, help them avoid buyer’s remorse by surprising them with additional post-purchase value that helps to ease the reality and elevate the idea.

Now the question is: Are you going to go through the harsh reality of implementing this or are you going to click away from this post, merely in love with the idea of it?