Friday, May 9, 2008

Your Competition Could Be Your Best Friend

The book "Blue Ocean Strategy" by W. Chan Kim and Renee Mauborgne describes a business mindset in which you make your competition irrelevant. It's a great book, but I would revise that a bit to say that one can make one's competition an asset. Your competition can actually help you grow and evolve.

The lowest margin business products and practices are those which are readily available elsewhere. If you model your business after a lot of similar businesses, you can expect to work very hard for low margins. How do you differentiate yourself and find your competitive advantages? That's where your competition can help. If someone else is providing a product or service better, faster, cheaper to the point that there's little business coming your way, take the hint. Focus your energy and resources elsewhere. Don't get caught up in the "who can be the cheapest" game. Visit your competition. Talk to your customers and theirs. Find out what customers are looking for that neither of you have. It may be a simple matter of packaging. Maybe people want larger quantities, or smaller. It may be a matter of quality. If you're not competitive at the low end, consider going high end, or vice versa. You may find that customers that use your product or service have other interests in common that you can take advantage of through your product and service mix.

Be agile and be attentive. Don't get married to a specific mix or model, or as radio talk show host Bruce Williams used to say "Don't fall in love with something that can't love you back."

Another key aspect to product and service mix development is to always do the math. Don't just look at percentages of return, look at hourly rate of return. If you're making a 300% markup, but it only amounts to $6/hour, you're not doing yourself any favors. Your time, your energy, your resources are better spent elsewhere. Sometimes raising prices to reduce sales in a particular category is a good alternative to dropping it altogether. If your customers want to pay a slight premium for the convenience of picking up a dozen widgets while they're at your store as opposed to making another trip to another store, that's fine. But if you know you're not going to make your fortune in high volume widget sales, don't focus on it.

Your competition can help you customize your product mix and make you unique. They do so by pointing out the areas you should avoid. Let the other guy work for minimum wage while you come up with new ideas, new products and new twists on old products.

You may be able to take advantage of new technologies to do so. For example Verizon now offers a plug-in device for your laptop that allows you to access the internet from anywhere. How can you use that? Well, if you're a real estate agent, for example , you can make house calls. You can search the MLS with your client at their home or office for their convenience. If you use free online apps, like those offered by Google, you can even schedule showings, appointments, closings and access all the files you need from someone else's kitchen table.

The up and coming Trader Joe's did not achieve success by trying to "Out Walmart" Walmart. They kept the idea of bulk purchasing, efficient distribution and low prices, but went for an entirely different product mix. They offer brands and varieties you can't get at Walmart. They recognized the fact that even Walmart can't offer everything, so why not focus on the things they're not interested in? They take pride in being different and have developed a kind of cult following. They can't open stores fast enough to keep up with demand.

You can also create "one-stop shopping" through your unique network. Always keep information on your trusted business associates handy. The more time and effort you can save your customers, the more you will be appreciated, remembered and recommended. One thing your competition doesn't have is you. You establish these relationships based on your parameters.

It's not necessary to talk down your competition. What you think of them doesn't matter. Let your customers and prospects do the talking. They'll tell you what they like and what they don't. Don't get defensive or offensive for that matter. Get pro-active. Focus on the customer. Solve their problems. No matter what industry you're in, if you're in business, solving problems and fulfilling needs is your job. Butting heads with other problem solvers is a waste of everyone's time.

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