How to Compete with Discounters
If you manage a small to medium-sized business, chances are you encounter pricing pressures from some version of a large discounter. Large competitors may have more money to spend to attract new customers, more buying-power to undercut your prices, and more resources to outlast you in a price war. If they’re from overseas, they may also have cheaper labour.
That’s why when chambers of commerce and associations bring me in to speak to business owners on competing with price discounters, my advice: “Don’t be better – be different.” In other words, don’t even try to beat their prices. Instead, be different in these three areas…
Target Different Customers
Don’t waste your time or money trying to attract bottom feeders. These are customers whose only buying criteria is low price. You might attract them with a sale or discount, but they’ll leave you to save a nickel. Let your mega competitor have them. The good news is most people do not buy strictly on low price. If that we’re the case then everyone would live in the cheapest homes, drive the cheapest cars, wear the cheapest clothes, and only dine in fast food restaurants. People typically buy on low price when they perceive no extra value. That leads us to our next area to make your business different…
Supply Different Offerings
By definition, mega-suppliers appeal to the masses. They supply stuff that average customers buy. So don’t go there. Instead, position your business a notch above. Yours is the boutique experience that provides either different products, better quality, expert advice, or preferably all three. Think about bicycles… you can buy them relatively cheaply at department stores, but serious cyclists shop at bike stores, or they order custom-made on-line. Either way, they’re willing to pay more for quality. That’s where small businesses do well and make more money.
Provide Different Service
Remember your goal is to target customers who are smart; more interested in quality and value than just buying whatever’s cheapest. Contrary to popular opinion, smart customers no longer value information. Before smart customers even contact your business, they’ve given their smart phones a shake or searched Google. It takes them less than a second for the search and the information is free. Free is worthless. That means that if your employees are merely providing information to potential customers they aren’t really creating any perceived value – at least not enough to warrant charging a premium.
The question, when it comes to service, is what are customers willing to pay a premium for? It isn’t friendliness. Nothing wrong with begin friendly, but employees at your discounting competitor can also be friendly. More to the point, your customers already have friends. And they’re also free.
What customers do value when it comes to service are three things; analysis, interpretation and advice. They want a genuine expert who has analyzed the plethora of options that are available. They want that same person to interpret which of these options might be best suited to that customer’s unique needs. And they want that expert to advise them on a few options. This requires that your employees need to not only know your products and services; they also need to know which questions to ask customers to clarify their unique needs. And they need to know how to position short-listed options in a way that help customers make smarter, faster, decisions. These are easy techniques I teach in my seminars.
When it comes to customer service, remember – this is business. Customers don’t want a buddy. They don’t want an informer. They want a trusted advisor. For this, customers will pay a premium.
Bottom line, managers and business owners would do well to worry less about beating their competitors’ prices, and focus more on becoming a category-of-one.