Compete or Shrink

Competition is a fascinating game. It starts with the concept of supply and demand. If you had no competitors (supply), all of your customers (demand) would be obliged to buy from you when they wanted the services you provide. Quite a pleasant thought, but alas, reality is stark and unrelenting. We live in America: the land of abundance; competition; free enterprise; and fragmented, crowded, noisy markets.

I hate to tell you this, but demand for your services will not really go up next year.
pie chartIn most local service industries, consumer spending isn’t likely to go up or down much year-over-year. After all, here in Northern California, population growth is around 1% per year. For your specific industry to grow organically beyond this minuscule rate requires either a change in consumer behavior or a big change in a cycle or specifics that happen to be meaningful to your situation (like a real estate boom or bust). As an example, say there are roughly 8,000 auto repair shops in Northern California that generate an average of $500,000 per year in revenue for a total industry revenue of $4 billion (if you have the urge, do some searches for your industry). In this example, local consumers are likely to spend close to that $4 billion on auto repair in 2017, and the same scenario is very likely for your industry—namely, virtually flat revenue.

Sooooo…
How do you get your company to grow much faster than the 1% population growth and do so with good margin customers? Answer: Do a better job competing for customers who are willing to pay for quality, which is the sector we call Quality Customers. This is easier said than done, especially since most of your competitors are trying to do the same thing. So, to get a bigger share of your market (which is key to your company’s growth), you have to do things to cause Quality Customers to choose you instead of one of your competitors. To succeed, the keys are to identify your edges, sharpen the ones that make sense to Quality Customers and emphasize these edges by out-communicating your rivals. Here’s our three-step guide to help you:

First, write down the names of five competitors that you mostly compete with for Quality Customers. Don’t include the low price/quality cutters—even though they have customers, these aren’t the types of customers you need to grow your business with good margins. Then, follow these steps.

1. Identify your company’s meaningful edges.
eyeLook at your list of competitors. What advantages does your company have that most appeal to Quality Customers? (Note: it doesn’t matter if you win in an area that Quality Customers don’t highly value.) Where do you definitely beat one of them? How about all five? Do you do a better job of preparing a Quality Customer for the job? Is your cleanup better? Is your team more responsive? Is your billing more transparent? Do you have a better patient reminder program? Does your technique or knowledge of certain types of work give you an edge? Write it down.

2. Sharpen the edges that give you a real competitive advantage.
knifeGRAPHIC 1Create a table with the names of your top five competitors on the y-axis and your top five meaningful advantages on the x-axis. Use this worksheet. Mark each competitor/advantage box with WIN, TIE or LOSE based on your sense of how you do on that specific advantage versus that specific competitor. Next, for each of your five Advantage boxes, decide on and write down three things your team can do to improve. What three things can you do to turn a LOSE into a TIE, a TIE into a WIN or even a WIN into a DOMINATE? (OK, I created an aspirational status.) You may decide that changing a material supplier will sharpen your edge against three of your five competitors, or that adding a pre-job consultation will edge out four of the five. Maybe improving your waiting room or new customer onboard process will sharpen an important edge. Come up with action items that you can accomplish even if it takes one or two years to gain the added edge. Hey, you’re in it for the long haul, and building a competitive advantage in one specific area often takes a lot of time and resources.

Let’s be realistic—we both know that sometimes there are no steps you can take versus certain competitors that will move a LOSE to a TIE, or a TIE to a WIN. However, finding edges that you can sharpen will build sustainable advantages in meaningful areas that will directly improve your attraction and retention rates of Quality Customers into the future.

3. Out-think and out-communicate your rivals.
chess and megaphoneIf you qualify for Diamond Certified, this is where your top rated status will help you do the work. If you get your Diamond Certified “pieces” into the game with each Quality Customer, you’ll greatly increase your win-rate. Of course, a hammer doesn’t jump up and pound a nail any more than a high-speed dental drill carefully removes a cavity in a patient’s mouth all by itself. Similarly, your team’s use of your Diamond Certified status and each of your Diamond Certified Tools will need to be deployed properly to help you win with Quality Customers.

Look back at your “Action Plan to Sharpen Competitive Edges” worksheet. If you qualify for Diamond Certified, which Diamond Certified Tools will help your team reinforce and prove your advantages? That question can’t be answered in isolation because Quality Customers come in all personality types and media preferences. Now is the time to formulate a simple “Staff Instructions for Diamond Certified Tool Usage” document that ties into the advantages you want your team to emphasize. How do you want your team to use your company’s tools? Include in your instructions WHEN to use, WHERE to use and HOW to use.

  • Custom Diamond Certified brochures (both the print and PDF emailable versions)
  •  Diamond Certified Company Report page, which resides on our highly trusted website
  • Your Expert Contribution Reprints, which prove Helpful Expertise (both the print and PDF emailable versions)
  • The Diamond Certified Video Profile of your company
  • The Diamond Certified Symbol and positioning language
  • Your Diamond Certified Research and Rating Report
  • Diamond Certified signs, banners and labels
Jim Stein, Founder and CEO

About Jim Stein, Founder and CEO

Jim Stein is the founder and CEO of American Ratings Corporation. Through his interactions with more than 6,000 local companies and analysis of over 1 million consumer survey responses, Jim has developed easy-to-understand strategies for consumers to enjoy consistently positive customer experiences and for companies to better satisfy customers, increase referral rates and reduce customer attrition.
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