How To Stop Competing On Price
I saw this ad the other day. I literally stopped my car and turned around so I could take a picture of it.
There’s a quote I’m quite fond of that I think sums up how I feel about small businesses competing solely based on price:
Somebody else is always willing to go out of business faster than you!
If price is all you have to compete on, then you’re on a going out of business curve. Being the “cheapest” is not a sustainable business model for a small business.
So you’ve got to do better than that.
Many of our business coaching clients, particularly in the contracting and construction areas complain that all people care about is the lowest bidder. “If I’m not the lowest bidder, I’m not going to win the job,” they say.
Our response to that is, “If you can’t find a way to differentiate your product or service other than price, then you better look for a different business or find different customers.” Sooner or later, the lowering of your prices and squeezing of your margins will DRIVE YOU OUT OF BUSINESS!
Just think about the guys behind this ad. The Gutter Boys. What images come to mind?
For me, I’m thinking about a couple of young kids. Perhaps they’re college students or recent college or high school grads. Chances are they have a truck and a couple of ladders. Some garbage bags and a pair of gloves. Not too much in the way of overhead.
They’re setting their price based on what bills they have to pay this week or this month. Or perhaps they’re trying to save up a little extra money for a Christmas present or upcoming spring break.
They’re not setting their price based on trying to run a business. So how is someone who is trying to run a business going to compete and succeed?
Find something besides price that your market cares about. What might people be looking for from gutter cleaners other than price? Try these on for example:
1. Guarantee: how about a guarantee that the gutters won’t clog. Or that you won’t leave a mess. Guarantee something that counters a common frustration of your market.
2. Insurance Coverage: what if one of the guys falls off his ladder while cleaning the gutters. What if he damages the house in some way (e.g. knocks a gutter down, breaks a window with the ladder, puts a hole in the roof, etc.)? Who’s going to pay for that? If your company has insurance it will take the homeowner off the hook.
3. Discount on subsequent service: maybe more leaves fall down later. Perhaps they need a spring cleaning after a rough winter.
4. Type of employees: are your employees drug free? Do you perform background checks on your employees so you know you’re not sending criminals to people’s houses?
5. Speed of delivery: when can you be there? Do I have to wait 2 weeks until there is snow on the ground or can you be here tomorrow.
6. Additional services: will you clean the leaves out of the yard as well? Can you fix a leaking or loose gutter? Do you offer to install some sort of gutter guards so I won’t need your gutter cleaning services again next year?
7. A little something extra: can you provide something creative or memorable for me. Perhaps create a collage of colorful leaves to leave a thank you note for your customer that will leave a lasting impression.
Holding out price as your #1 competitive advantage just means you’re not really trying. There are so many other ways to compete by capturing the imagination of your customers.
So what’s your competitive advantage?
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