|
Volume
3; Issue 4
I
Don’t Know if I Still Have a Strategy – Part 3 of 3
Differentiated Value
In Parts 1
and 2 of this newsletter series, we examined some strategies and
suggestions for determining how your company measures up to the competition
and why your customers buy from you.
The six questions we have been addressing are below. Part 3 analyzes the final
three questions in an attempt to shine more light on the issue that is the
heart of any business strategy – Differentiated Value.
- How many different
reasons are there to explain why customers buy from me?
- How many of my customers
also buy from my competitors? How much do they buy and why?
- What makes my company
different than my competitors? (Include the good things and the bad.)
- Is my goal to keep up
with, stay ahead of, or be different from my competitors?
- Do I have the right mix of
products and services or am I trying to be too many things to too many
people?
- Are my customers in
growing, mature or declining industries?
What
is Your Competitive Goal?
Many business owners do not like to admit it, but they focus so hard on
internal company issues they fail to monitor their business relative to the
competition. Others seem comfortable so long as they are the same as their
competitors. Fewer still, are the owners who constantly seek to lead the
way, forcing the competition to keep up.
There is an old saying that goes, “You can’t be better unless you are
different.” As simple as this may sound, it is actually a difficult formula
to implement. The goal is not to be different, but to be different in such
a way as to influence customer behavior. For example, increase the customer
base and/or expand average purchases per customer. Here is where we return
to the term, “differentiated value.” It is what makes you better than your
competitor and not simply different. Therefore, the difference we bring to
our business must be viewed from the customer’s perspective and not
our own.
An
Analogy of Differentiated Value
The local coffee shop has a different clientele than Dunkin’ Donuts. Then
there’s Starbucks, whose customers represent still another customer
segment. If one were to ask what differentiates these three coffee
retailers, the answer isn’t the coffee. All three have great coffee.
Consider the evolution of these businesses.
First there were coffee shops where “the locals” gathered to sit, enjoy
coffee and perhaps have breakfast. Along comes Dunkin’ Donuts with a
different marketing proposition that included take-out coffee, donuts and a
pledge to brew fresh coffee every hour, all day long. Many coffee shop
clients migrated to this new business concept because it was less expensive
and more convenient than the coffee shop. Many people who hardly ever went
to a coffee shop saw Dunkin’ Donuts as a novelty and a convenient way to
get a coffee on the go. In other words, Dunkin’ Donuts changed the way
people thought about getting their “coffee-fix” in a convenient manner
(take-out) at an affordable price.
Starbucks then entered the picture with a different value proposition – the
“coffee experience.” Starbucks sought to carve out a specific niche in the
market that would attract image-conscious consumers possessing the economic
means to appreciate a new coffee experience. Starbucks created a coffee
cult.
Prior to the entry of Dunkin’ Donuts, coffee shops were considered a mature
industry and every coffee shop competed with the other based on location,
price and menu quality. Many coffee shop customers were prepared to try
something new. Many non- customers of coffee shops were also prepared for a
new experience.
What is the point of this coffee shop analogy? You need to understand that
your customers may all look the same and behave the same based on the
common product or service offerings that exist, much like coffee shops. In
other words, their behavior is governed by the constraints an industry
forces upon them.
In fact, your customers are comprised of segments that would behave
differently if given the right options. There are also non-customers
(people who don’t presently buy from you or your competitors) who would
change their behavior if tempted by the right value proposition. Consider
the people who drank coffee daily but never frequented coffee shops. Many
of these non-customers of coffee shops became customers of Dunkin’ Donuts
or Starbucks because they weren’t looking for a sit-down, breakfast
experience. They simply wanted or needed their coffee experience to be
compatible with their lifestyle requirements.
As you re-think your customer base in terms of segmentation, ask yourself,
“Am I giving my customers what they need or what they want?” Coffee
drinkers need coffee in the morning but are not willing to take the time to
stop at a coffee shop when they may be late for work. Therefore, the coffee
shop has what these people need, but not what they want.
Compare this analogy to your own business.
Strategies
in Mature or Declining Industries
The thoughts and examples discussed thus far are relevant within stable or
growth industries. Sometimes, companies are faced with a situation in which
their market is either very mature or in decline. The strategies for these
industry types are different.
If you are in a market that is in, or caters to customers who are in mature
or declining industries, you may not want to make any further changes or
investment in your own business. After all, why bother when you know your
customer base will be shrinking by the month? Here are three potential
options if your company falls into this industry type.
- If your company’s
financials are stable, you could sell the company now.
- You could seek to dominate
the market by acquiring competitors at bargain prices, or take over
their contracts but agree to continue producing for them under private
label. You could use your new size to get better supplier pricing, and
squeeze out any small remaining players.
- Seek out the best
niche(s) within this market and focus on them with laser-like
precision. This includes those products or services offering the best
margins and the longest life expectancies. Reduce overhead and
shut-down all unnecessary operations.
|
|
POSITION FOR TRANSITION
|
|
|
|
BizMACH is an
association of highly skilled consultants, evaluation experts and merger
and acquisition specialists.
We take ordinary companies and create
extraordinary value.
Best of all, we only work with lower
mid-market companies and our fees reflect our confidence.
Ninety percent or more of our fees are
contingent upon the successful transition of your company - even if that
sale is years away.
Competitve
advantage is the key to revitalizing your company's growth and
profitability.
Call us if
you'd like a free consultation and to learn how BizMACH can grow your
company and increase its value.
Ed McCormick,
CEO
Ann Coffou, President
Click to Email BizMACH
Solid Oak Consulting, LLC
522 South Elmwood Ave
Oak Park, IL 60304
708-524-0886
telong@solidoakconsulting.com
Accredited by the Institute for Independent Business
Contact Tom Long
If you're not working with BizMACH, you're not using the
BEST
Business Evaluation and Salability Tool
|
|
