Delivering "The Right Stuff"
by
Jaynie L. Smith with William G. Flanagan
Authors of Creating Competitive Advantage
Your customers, or would-be customers, need to be informed and reminded of
what added values you provide them -- extras that can save them money,
time,
and aggravation. Yet too many business owners and managers can be ignorant
of what those competitive advantages are. The seafood supplier didn't
communicate that he was selling fresher salmon with longer shelf life, and
thus enhancing his customers' bottom lines, until a competitor threatened
his market share.
You could be providing a lot of extras to your customers without realizing
how much you are actually saving them. Or, if you do not provide
meaningful
extras now, you might consider adopting them. They can be critical
competitive advantages. Consider the following:
Terms. If you are a small or medium-size company up against a category
killer, you might have flexible financing terms that the big guys can't
match. For example, a lumber company in the Northeast enjoyed a robust
business with little substantial competition until Home Depot began to
close
in. One Home Depot box opened twenty miles away, and then another just ten
miles down the road. Observers predicted that the lumber company would
soon
be bulldozed out of business.
Surely, it couldn't compete on price, not against Home Depot's buying
power.
Lumber is lumber. So it concentrated on hitting Home Depot where it was
vulnerable. It offered more -- flexible credit arrangements for its most
im****tant customers -- small contractors who often lack lines of credit
from
banks. The lumber company didn't have to drop its prices to stay in
business. It adopted new competitive advantages.
Guarantees. It is common for attendees at my seminars to tell me that
their
companies are "the only ones in our industry offering multi-year
guarantees"
on their products. But when I ask if they make a big deal about the
guarantee to prospective buyers, most admit they do not.
The reason is usually the same: "If we emphasize the guarantee, too many
customers may take advantage of it."
That's a pretty lame excuse. Either you offer a guarantee or you don't. If
you are confident enough in the product to guarantee it in the first
place,
make a selling point of it. Statistics show that a very small percentage
of
customers in any business actually use the guarantee. But the guarantee
takes a lot of risk out of the buying decision and clinches a lot of
deals.
Inventory turns. One of my favorite stories about inventory turns involves
a
clothing manufacturer who sold women's clothes to boutiques around the
country. When I asked him what differentiated him from his competitors, he
said he thought his clothes were "wearable."
"As opposed to what?" I asked, trying not to laugh. He began to talk about
design, fabric, cut, and so on. When I queried what his competitors we're
saying, he shrugged and said, "I suppose the same thing . . . but I know
my
stuff sells much better."
I asked him what his customer, the boutique owner, cares about most.
"Whether or not it sells," he said. So I asked if his shop owners measured
inventory turns. He answered that some did, some did not. I suggested that
he teach them how to measure inventory turns and then he could prove to
the
shop owners his clothes sold better. My point was that he should stop
selling "wearable clothes" like everyone else and start selling inventory
turns. Moving the goods is what matters.
Note: Be sure you can back up your boast. Your buyers will know soon
enough
if you can't. As with any competitive advantage you claim, make sure you
deliver.
Materials. One client in the home-improvement business who sold siding
knew
his product was "stronger and better" because of the materials he used.
But
he didn't know how to convey that without sounding biased and subjective.
Upon asking his employees a series of questions I learned from one of his
engineers that the company's product has a higher wind load rating than
any
competitive product. In many geographic markets, the higher load rating
influences buying decisions. So if your materials are stronger and provide
customers with a benefit, shout about it in a way that is measurable.
Delivery. If you provide the same product as your competitors but you
offer
better delivery service, you have a competitive advantage. But how
im****tant
is it? The Compleat Company, which sells promotional products, decided to
find out. The Seattle-based company polled its customers about the
im****tance of its on-time delivery. It found that its customers not only
valued that service highly, they had a pretty low tolerance for being
late.
Eighty-eight percent of its customers defined "on-time delivery" as being
on
schedule 97 percent of the time or better. Only 4 percent of its customers
would accept an on-schedule rate of less than 93 percent. A manager from
Compleat told me that the company is now focusing its energy and resources
to make sure it meets that expectation. When Compleat's customers want
their
deliveries, they will get them.
Information. In business as in war, intelligence can be priceless. In
Business @[EMAIL PROTECTED]
the Speed of Thought (Warner, 1999), Bill Gates writes: "The
most
meaningful way to differentiate your company from your competition, the
best
way to put distance between you and the crowd, is to do an outstanding job
with information. How you gather, manage, and use information will
determine
whether you win or lose."
Knowing what your competitors are doing, and keeping up with trends in
your
industry, are basic forms of intelligence, and essential if you are going
to
run a successful business. So is listening to your customers. (Your own
and
your competitors'.)
The more competitive the business you are in, the more im****tant the role
of
intelligence. You can't afford to get caught flat footed if, say, a labor
strike shuts off deliveries of critically needed material. Or if commodity
prices suddenly spike or drop. Or consumer confidence sinks. Or if new
products being developed by your competitors threaten your markets.
No matter what business you are in, failing to keep a weather eye on
changes
in your industry can be fatal. A lot of this "intelligence" is hardly
proprietary. It simply amounts to smart business practices born out of
experience. If you are a B-to-B supplier who sells to retailers, your
customers' success determines how well you do, too. Your experience can
help
your clients avoid common mistakes.
Small and medium-size businesses are often in the dark about key
developments in their industries. They lack the time, money, and expertise
to gather and evaluate that information. But that doesn't mean it isn't
im****tant. Consider the prices they pay for the goods or services they
buy.
Advance word of radical price ****fts, or new products that will make
others
obsolete, can save them from missing a buying op****tunity, or from laying
in
inventory that will soon become obsolete.
Keeping your customers informed of trends can only make them healthier,
and
in turn create more business for you. Word of mouth from your sales force
is
one time-honored way to accomplish this. But in this age of the Internet
there are other effective ways, too, from e-mail to Web sites that keep
clients posted on prices and other industry developments.
One of my former clients, the Institute for Trend Research, in Concord,
New
Hamp****re, analyzes market and economic trends and makes accurate
predictions as to when those trends will change. Its business is its
forecasting expertise in a wide range of sectors, from industrial
construction and agricultural market movement to interest rates, commodity
prices, and inflation.
Subscribers to the company's publication EcoTrends get an im****tant bonus:
a
discount on EcoCharts. EcoCharts, using raw data that the subscribers
provide themselves, tells them which indicators included in EcoTrends
correlate best to their specific businesses. ITR has defined four phases
of
economic movement; if the trends that affect your industry are in Phase C,
then you are expecting a downturn. Your actions might include a reduction
in
inventory and training, an avoidance of long-term purchase commitments,
and
deeper concentration on your cash and balance sheet. On the other hand,
during Phase B, an upward trend, you would accelerate training, increase
prices, consider outside manufacturing, and open distribution centers.
This
kind of information can provide companies with powerful competitive
advantages.
Training. Many large companies offer specialized training for their
customers, free or at cost, so they can run their business better.
McDonald's
runs its own academy for new franchise owners, for example, so they can
learn to avoid common pitfalls and maximize the return on their
investments.
The company draws on the experiences of thousands of other franchise
owners
and shares that knowledge, because it is vital to their own business. I
often recommend to clients that if they invest heavily in training they
should make a competitive point of it. For example, "We invest half a
million dollars each year training our employees" or ". . . training our
customers."
Excerpted from Creating Competitive Advantage by Jaynie L. Smith with
William G. Flanagan Copyright © 2006 by Jaynie L. Smith with William G.
Flanagan. Excerpted by permission of Currency, a division of Random House,
Inc. All rights reserved. No part of this excerpt may be reproduced or
reprinted without permission in writing from the publisher.
Author
Jaynie L. Smith is the founder of ICS Marketing and president of Smart
Advantage, Inc., a management consultancy whose clients include hundreds
of
middle-market businesses. She also serves as the Florida chair for The
Executive Committee (TEC), an international organization of over 11,000
CEOs. She resides in Hollywood, Florida.
William G. Flanagan has been a writer and editor at Forbes, the Wall
Street
Journal, BusinessWeek, Esquire, and New York magazine. His last book was
Dirty Rotten CEOs (Citadel). Visit www.smartadvantage.com for more
information.
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