For years I thought that in order to make money your business had to be different. All the marketing classes talk about a business's "USP," or unique selling proposition. I know plenty of businesses that are different but they don’t make any mone. In fact, many of them have gone out of business. One that comes to mind is an electronics store called The Wiz, which had the tag line "Nobody beats the Wiz." I wonder if the name, different as it was, actually helped them go out of business? Truth was, nobody did beat the Wiz, because they had the lowest price. But it wasn't long before they were gone. What does "differentiation" mean unless it adds to your bottom line?
Maybe it’s not just being different — maybe there’s a missing component. The missing component is the customer and how the customer feels about your differentiation. Does the difference really matter to them? I talk to retailers who tell me that the most important part of the ad is their family and their children—they say everyone remarks how good they look. My question is, can you connect the children and the number of sales? No one can answer the question with any statistics.
I notice in many beauty salons the hairstylists have strange color hair and hair styles—most not desired by most customers! In fact it somewhat frightens me that I might be the recipient of one of those colors or one of those haircuts. They certainly are different but I don’t see many of those haircuts or those colors on top of the average person. Maybe they should ask their customers what kind of looks they want and then wear those cuts and those colors. If you have blue-haired customers maybe it would be wise to have a stylist with blue hair? How many people have you seen going out of the salon with those colors and cuts?
This started me thinking, what really makes a difference? A year ago I attended a workshop in Ft. Lauderdale, FL on Building your Competitive Advantage, given by author and speaker Jaynie Smith. One evening, driving in my car and listening to NPR, I heard Jaynie Smith talking about her book on building a competive advantage. Everything she said made sense to me.I stopped at the nearest Barnes and Noble and bought the book. After reading it I made a point to call. We decided to meet in Ft.Lauderdale at one of my seminars so I could ask her about her book. One of the most important things that Jaynie said was that building your competitive advantage can do one very important thing for your business: it can free you from price-based competition.
With times as tight as they are, we are seeing more big boys biting the dust. Is there really a difference between Borders and Barnes and Noble? And how many book stores do we really need? I guess not as many — Borders has filed for Chapter 11. And so it goes for Linen 'N Things and Circuit City. Deep discounts, coupons and giveaways bring customers in but it also lowers the bottom line profit. One of the things that these businesses have in common is that they look so much like their competitors you can’t tell them apart.
Businesses struggle to be different. Staples has an Easy Button, Best Buy has the Geek Squad, Chrysler had “Dr. Z.” and of course everyone knows the AFLAC duck but it doesn’t necessarily mean that it’s a competitive advantage.
Dr.Z turned out to be a bomb; for one thing he wasn’t Lee Iacocca who everyone knew was a big cheese and knew what he was talking about. See Iacocca's own ideas about this in his book, Where Have All the Leaders Gone?. Also it was hard to understand what he was saying and somehow his interpretation of stuff didn’t seem funny, it was just awkward.
Little Richard howling during the Nationwide Insurance commercial may make you hold your sides with laughter but if your roof falls in over the weekend and the Nationwide claims adjuster doesn’t return your call until Monday, Little Richard may just be a constant reminder of how Nationwide wasn’t on your side–rather than a competitive advantage.
So what does it take to turn your differentiation into a competitive advantage? First you need to understand that just because you’ve found something that makes you different, it doesn’t necessarily mean that it is a competitive advantage. As companies brag that they bring their dogs to work and that they’re family owned, how do they know how many customers thought that this was a good enough reason to do business with them? Sure the customer wants to know how your dog is doing–he’s sitting in your showroom and in your ads, but how many customers actually thought this was a good enough reason to pay your prices? Or is your dog discounting your prices on the side? Having been in a family owned business for 20 years may make you and your family feel proud but to customers it may just make them think that you’re old and not very interesting.
Now I know that some of you are now up in arms because you’ve worked so hard to make the dog a celebrity or yourself. Consider the talking gecko from teh GEICO ads. He isn’t just a gecko but an educated gecko with lots of statistics and information to make you want to believe what he has to say. He knows his job and his lines, but again if GEICO didn’t come out with your insurance payment you’d be looking for geckos to stomp in your front yard..
The important point again is don’t confuse differentiation with a competitive advantage.
It reminds me of the two brothers who are building a watermelon business and decide to go to Mexico to outsource what else their product. At $1.00 a melon they can hardly touch the price in the US. With that in mind they set up their stand in Texas and put out a big sign that says, "Watermelons $10.00 a dozen." Of course at the end of the day the watermelons are gone and the boys are broke. After soul searching about their thriving business and lack of cash, they come up with the solution to buy a bigger truck. Somewhere we all know that if you’re losing money you can’t make it up in volume but that doesn’t stop many from trying.
After years of designing and delivering sales training, actually 9000 retailers later, something began to gnaw at my mind. Salespeople are still asking the same questions: how do I overcome objections and close the sale. It has become evident that one of the reasons not to ask the big “D” question ("Do you want it?") has to do with the possibility that you will have to defend what makes their company or product different, that vague term called “value added” and the salesperson can’t come up with anything other than price or the dog.
So what are the steps: first is to determine what makes you different and to weigh whether this actually is a competitive advantage. Who would really know other than your customers? Let’s start with the customers who have defected. Even the most successful businesses have some customers that manage to get away, even businesses with huge market share. Why? Mostly because their salespeople don’t exactly know their competitive advantages and why customers buy from them.
The first thing to do is commission a survey on customers that are MIA and find out what happened. A list of well thought out questions, such as why did you buy at the other store, and how much did you spend, will give you enough information to scare even the most successful to reexamine how they are treating their customers. You can take this information, feed it back into work groups with your staff and have them design new business practices that will at least control the process and what I call “points of decision” for the customer. Now we’ll have information about what we need to change or where we can step up to the plate.
The next place for customer information would be customers that are sometimes called “raving fans”, customers who love you, paid your prices and are out spreading good will. A survey with them will help you discover why they actually brought from you. This is a good time to bring up the dog and your family. If none of these rate high on the customer’s priority list, you will discover what does. Find out what it is, how you can do more of it and teach your employees to embrace these principles.
Armed with this data, you can now set about putting words to the music. Here is the part where customer service has been defined and quantified. Something we have not done in our business. Having been in business 30 years should provide you with data on your abilities; How many of these customers are repeat and referral business, how many satisfied customers do you have, what is your complaint ratio and how many photos of completed jobs and letters from delighted customers can you show your prospective customers?
One focus groups tell us that customers want to see photos of jobs more than anything and most businesses haven’t got the time to take pictures.
Remember, female customers don’t buy products, they buy interiors. Do you have completed interiors to show them or just products? The key is, how does “that” look in a home like mine?
What about your commercial business, do you have data on your performance that would make that elusive contractor want to switch vendors? Take it from the airlines who brag about “on time arrival, 95% of the time” or “3% lost luggage." There's Hyundai with their 100,000 mile warrantee, or a face cream with 85% of their customers saying that within one month they noted at least 50% improvement. Automobile manufactures scrambling to have JD Powers rate their number of complaint and gas mileage. How about the Cleveland Clinic boasting their track record for heart operations?
If you can translate your good will, number of happy customers or lack of complaints into measurable data, then you can build your competitive advantage. Something to make your competitors cringe. But it will mean that you will have to be diligent with your surveys, which many businesses dismiss as being a pain and how will they get them back from the customer.
But being able to boost 35 years in business and 95% customer satisfaction or having won the local kitchen design contest for the third year in a row could be the tie breaker for your salesperson and the sale. Depending on how gutsy you are, who knows what you can measure?
One owner shared with me that he had sold flooring to 4 employees at the local big box; how fun to run an ad that even the big boxes buy product from you. (Why not as long as you have the invoices?) What are they saying about you at the Better Business Bureau or Angie’s List? Is someone out there blogging about your incompetence or raving about your service. Start collecting the data.
Even something you're not proud of might turn out to be a competitive advantage; an owner recently told me that 99% of the time over the last 20 years they had installed flooring in the right house. It might bring a chuckle but if you’re willing to discuss it will certainly get the customer to wonder about your competitor’s track record!
Going back to our salespeople; the hardest people to get to come to training — if they come — are the seasoned veterans who are making a lot of money. With all due respect, they pretty much think they have it all figured out and rarely worry about who got away. Armed with a list of customers that got away and the amount the customer spent with their competitor will kick even the most successful into high gear and give them something new to shoot for. Remember it’s the customer who makes us either successful or not successful and it’s time to find out whose side they’re on.
So what makes a difference? One night last week I’m traveling on the New York State Thruway and I stop at a McDonalds for a snack. I notice on the side of my cup it says, “McDonald’s washes their lettuce twice.” Wow, I never even thought about them washing their lettuce once! I go to the counter and ask the server did she know that McDonalds washes their lettuce twice? To which she replied, "With the e-coli scare we can’t be too careful!” Not only did she know the difference by why it should be important to the customer. Armed with that information I stopped at Burger King and Taco Bell. Not only did they not know how many times they washed their lettuce but I had the feeling that they wanted someone to get the strange lady out of their establishment. There it was, an obvious made important to the customer. This is one of things that Jaynie wrote about—a competitive advantage can be something that is obvious and common to all in a business but no one talks about it.
My next stop is Target: I notice the luncheonette sign says, kid’s meal, Organic Macaroni and Cheese. Wow! Even Target knows differentiation. I asked the server about the macaroni and cheese and she said, lots of parents want their children to eat the organic food! Even she knew.
So my quest takes me to Starbucks and I ask the Barista what makes Starbucks different and she says “coffee," oh well, maybe that's why Starbucks is stuck where it is.
Across the street from my house is The Perfect Cut Beauty Salon. It’s a cute little shop, serving cookies and coffee and boasting a big long haired old dog. I think the doggie's cute and I even forgive his doggie breathe. I even forgive his long shedding hair until I get home and notice that my toenails are sprouting hair; yes, it’s doggie hair in my nail polish. Dog’s cute and different, but not a competitive advantage. I wonder how many customers they’ve lost because of “hair in the polish?”
Three obvious things that need to take place—one is you need to know what makes you different, find out what your customer thinks about it and I then train your employees to deliver the message. I remember several years ago on a Delta flight I asked the flight attendant if they were serving more coffee since they were carrying Starbucks. Again she looked at me like I was the only one with that information. Her remark: what do you mean?
Number 1, define it so that it’s concrete, you can see and count it. If you can see and count it you can measure it.
Number 2, after you “test drive” it with your customers, you will know what they think. A comment sheet left after the job will allow you to measure the results. Give the customer a choice, a rating service from 1-10, and then we have numbers we can share with customers.
Hey did I tell you that “every egg is individually inspected by McDonalds. All 3 billion a year."?