Differentiating your Model

Sometimes it’s difficult to find a truly compelling way to differentiate your product or service.  Try as you may, you just can’t find anything meaningful to stake your claim on that is any different than the rest of the pack.  Don’t be discouraged…this happens to the best of us. 

If you’ve spent hours brainstorming with your team and running the ink out of your whiteboard markers without having one of those “eureka moments”, maybe it’s time to look down a different avenue to find your differentiation.  Have you considered how you might differentiate your company based on your business model rather than your product or service?

Numerous notable companies have differentiated themselves based on their business model alone.  Dell Computer is a great example.  In the early days, Dell’s direct to the customer model blew its competitors out of the water.  The direct model allowed Dell to offer customized products to each customer at a lower price because the product didn’t have to go through all the markups at each stage in the distribution channel.  It also helped Dell minimize inventory which provided another competitive advantage.  Their product was basically the same as their major competitors (HP, Compaq & IBM at the time).  It was their model that gave them the edge to capture the dominant position in the PC market at that time.

Other companies like Pampered Chef and Southern Living also forced their way into crowded markets by implementing a unique business model.  Both of these companies chose to forgo the typical approach to selling kitchen and house wares through retailers.  Instead, they leveraged a large and willing network of housewives who wanted to make a few extra bucks while raising their kids.  Using home parties that leveraged preexisting networks of relationships, sales at these companies exploded rapidly.  Very Clever!

Adobe was able to quickly capture new customers by seeding the market with their Adobe Reader (which used to be called Acrobat).  They solved a significant problem which was incompatibility of files types being shared across operating systems and application types.  Major players like Microsoft, IBM and Apple controlled the space so it would seem impossible for Adobe to wedge into the market.  But, they did by giving away the Reader which created a huge base of worldwide users very quickly.  Then they made money off of end customers and other software companies who bought their software to convert files to into their standardized format.  Ingenious!

Lastly, we’ll point to internet companies like Google and Yahoo.  Do you pay when you execute a search on either of these sites?  No.  Why not?  Because someone else is paying your bill for you.  Google, Yahoo and many other companies use an advertising model where they offer a valuable service to one audience for free and make money by charging another audience (advertisers) who want to reach those customers.  Brilliant! 

Maybe there’s a way you can twist or tweak your business model that enables you pierce a bigger hole in the market.  Rather than trying to differentiate on your product or service, you could find an innovative business model to employ.  Consider the models described above and look across other industries to see if there’s a unique business model you could bring to your industry. 

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Tapping into the Pain

The printer industry is a racket.  They give you a sweet printer with all the bells and whistles for $79 to $159 (or more) then they kill you with the cost of the ink.  We all know that’s their business model but it doesn’t make it any less frustrating when you drop $60 on ink cartridges every few months.  One of my printers has been on the blink so I’ve been thinking about buying a new one.  So when I caught a piece of a Lexmark commercial that talked about “the most affordable ink” I stopped in my tracks.  They promoted a $4.99 black ink cartridge.  Are you kidding me?  That’s great.  I’ve been paying at least 5x that amount. 

I rarely make a significant purchase without doing at least a little research.  Not on this one.  I went directly to the store the next day.  Walked in and picked up a Lexmark printer, paid and walked out.  The guy was like “do you want to look at any of the other options we have”?  “Nope”, I said.  And, I've never purchased any products from Lexmark.

Usually when you buy a printer there are many other factors to consider.  The primary buying criteria is usually print quality…especially when you’re buying a color printer.  Another key buying criteria is pages per minute (since you don’t want to wait forever when you have to print a lot of pages).  But those buying criteria and every other potential buying criterion went out the window for me this time.  Why?

Because Lexmark’s advertisement tapped into my #1 pain related to printers: the cost of ink cartridges.  I have no idea whether any of their claims about lower ink cost are true.  But it doesn’t matter.  They said what I wanted to hear so I went for it.

The lesson for business strategists and sales folks: find your customers’ #1 pain and deliver a focused, compelling message about how your solution will eliminate it.  Don’t dilute your message talking about all the other pains you can alleviate.  Sometimes it’s best to just pound them over the head with one crisp, clear message. 

To do this, you must truly “know thy customer”…the starting point of any great business.

Positioning against the iPad

As you’ve probably seen, there’s a tsunami of tablet vendors launching products over the next few weeks and months.  Apple demonstrated that there’s a market for tablet computers so the rest of the world is running fast to join the party.  Most people think that it’s impossible to compete against the iPad. But it doesn’t have to be. 

A great strategist can always find a way to pierce a hole in the armor of even the strongest opponent.  How would you position against the iPad if you worked for one of the other device makers like HP, Samsung, RIM or Motorola? 

You can usually exploit a weakness that hides behind your competitor’s greatest strength.  What is Apple’s greatest strength?  There are several but most people would say that ease-of-use is their greatest strength.  Apple’s products are easy to use because the entire product (hardware, software and content) comes from Apple. 

What is a weakness that competitors could exploit?  While ease-of-use is a benefit of buying Apple products it comes with a price.  Sure, it costs more to buy Apple products but the cost I’m talking about is something else.  Apple products come with a pair of handcuffs.  You can only buy Apple products or products that are controlled by Apple’s distribution platform (iTunes) and you can only use their products in the exact manner that they allow.  This can be very frustrating when you want to do something outside of Apple’s predefined boundaries. 

Apple competitors could exploit this area by positioning around ideas like “enjoy the freedom of doing things your way” or “it’s your tablet, use it however you want to” or even “you don’t have to be controlled by anyone”.  Apple tried the “all-in-one” approach in the early days of the PC wars.  They had the best products back then too.  But, they lost the war because Microsoft and thousands of other hardware and software companies combined forces to crush them.  We learned back then that the best product doesn’t win.  But, technology purchasing habits have changed in the last 20 years so we can’t be sure that history will repeat itself.

No question about it, the tablet wars are about to get interesting.  Is it possible for Google and their cast of hardware partners to catch-up to Apple?  I don’t know.  But it’s going to be fun to watch!

One company with good values

Sometimes things that are outside of your control will negatively impact your customers.  No business is immune to struggles, challenges and problems.  It’s just the nature of the beast.  The true test of a business is how you handle the problems that come your way. 

Company values are one of the primary factors that determine how you handle problems.  Some companies have very clear values that they actually live by.  Other companies don’t really have any clear values.  They just do whatever, whenever.  And still some companies have stated values that they don’t actually live by.  When the rubber meets the road and problems arise, a company’s true colors will come shining through. Many companies will say that they put their customers first.  However, when tested, you find that the value they actually live out is “we put our customers first as long as it doesn’t cost us too much money.” 

That is not true of Strand Brothers heating and air conditioning in Austin Texas.  Strand is a company that lives by their values and provides stellar customer service…even when it costs them money.  We purchased a new heating and air conditioning unit for our house a few years ago from Strand Brothers.  Unfortunately, we started experiencing problems with the unit soon after it was installed.  To be clear, the mechanical problems were not Strand’s fault.  They are the service company and not the manufacturer.  It was a brand new unit and sometimes faulty equipment comes off the manufacturing line.  Over the past few years Strand has repaired the unit free of charge several times.  Last year they finally replaced it with a new unit for free after recognizing it was a “lemon”.  This year we turned on the AC for the first time and the new unit wasn’t working.  While it’s extremely frustrating to be running into problems with yet another new unit, I greatly appreciate Strand stepping in to provide more repairs for free.  The typical response from most companies is “sorry sir, the unit is out of warranty…you’ll have to pay for the repairs”.  Or, they’ll make you scream and holler to get them to do the right thing.

I can’t imagine having a company handle the problem better.  I will be loyal to Strand Brothers forever and I will recommend them to everyone I can.  It may have cost them money to do the right thing.  But in the end, they will make a lot more money off of me and my friends.  Thanks Strand!

I had a friend define business as “a series of problems to be solved”.  There is certainly a lot of truth in that statement.  All of us can learn from Strand’s example.  Take your hardest customer problems and turn them into a great customer experience and you’ll sleep well at night while you build a loyal customer following.

How to alienate a customer for only $5

My intent for ThisQuarter’s blog isn’t to use it as a forum for touting the egregious customer service violations I experience in my daily life.  However, it seems that once I made the conscious decision to be on the lookout for business experiences that are relevant to revenue growth, these are the types of things that keep popping up.  In most cases, I intentionally omit the company name when it’s a story of poor service because my goal isn’t to bash companies but to encourage business leaders.  I hope that reflecting on these situations will help you take a closer look at how you interact with your customers and inspire you to consistently improve your service.

On a recent family road trip we decided to make a last minute stop in El Paso.  The night before, I had checked the room rates for a particular hotel that was in the area where we wanted to stay.  The price on Expedia was $89.  When I walked into the hotel to register, the guy at the front desk said the room would be $94.  I let him know that the price listed on Expedia was $89 and asked if he would honor that price.  He refused.  (Huh?!)

I asked him if they had free wireless internet access.  He said “yes”.  So I said, “you are telling me that I can sit down with my laptop on that couch and book it online then walk up to you in two minutes to check in and you’ll give me the room for $89”?  He said “yes”.  You’ve got to be kidding!  It really blew my mind.  Of course, I persisted and he ultimately gave me the room for $89.  But, rather than feeling satisfied that I had won the battle, I was left feeling the same as if I had paid the higher price because I had to go through the arm wrestling exercise to make it happen.  Thanks to that experience, I will try to avoid staying at that hotel chain in the future.

The moral of the story: Don’t hassle your customers.  Just give them a good deal and they’ll usually come back and spend more money with your company.  If you promote different prices through different sales channels, honor them through other channels if the customer brings it to your attention.   There’s no reason to alienate a customer for $5.

Building Customer Loyalty

The other day I was digging through my wallet to find my frequent buyer card for the haircut place I go to.  After I got in my car I started looking through all of the frequent buyer cards I had in my wallet.  Ridiculous!  I had 8 cards for restaurants, sporting goods, office products and grocery stores.  It’s kind of frustrating to sit on a big fat wallet (not filled with cash), thanks to all of the cards that retailers bury me with to try to get me to be a loyal shopper.  In an effort to build loyalty, these companies are actually frustrating their customer. 

Retailers don’t have to burden their customers with carrying around one of their frequent buyer cards.  They could simply keep then cards in a file by the cash register.  Or better yet, they could get into the 21^st century and track customer purchases with a computer and give the customer the free thingy or discount when the computer says they’ve jumped through the appropriate hoops. 

Every business wants loyal customers.  The best way to get them is to earn them by consistently delivering great products and services.  If you want to incentivize customers to take certain actions, make sure you think through all of the angles.  The last thing you want to do is create ill-will as you’re trying to build customer loyalty.

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The first secret to building a great business

My wife went to the cell phone store to buy one of those gizmos that you can plug into your laptop so you can connect to the internet anytime via the cellular airwaves.  (Pretty cool.)  She wanted to buy it at the store, rather than online, so she could get it immediately since she was driving to Dallas the next day.  If she bought it online she would have to wait for a few days to receive it in the mail. 

When she got to the store the sales assistant gave her a recommendation on which device to purchase.  Then he suggested that she should go home and order it online because it was a much better deal.  She asked if he would just honor the online deal in the store since she was already standing right in front of her and she wanted to have it for her trip the next day.  He said he couldn’t honor it. 

She came home and tried to buy it online only to run into glitches with the checkout process on their website.  She was completely frustrated after wasting a couple of hours driving to the store and getting refused then coming home and wrestling with their website.  At the end of the day she still didn’t get what she wanted.  And guess what, the cell phone company didn’t get a dime of our money.  They frustrated an existing customer and lost revenue with the greatest of ease.

Let me share the first secret to building a great business:  Don’t frustrate your customers!

It takes diligence, attention and honesty to look at your business and uncover areas where you might be frustrating your customers.  The CEO of the cell phone company has no idea that the numbers he will report to Wall Street at the end of Q1 will be lower than they would have been had his company not frustrated their customers.  My wife, and hundreds or thousands of other consumers, did not make purchases because they were not given the same deal in the store that is offered online.  How many of your customers or prospects didn’t buy because you frustrated them?  Do you know?