Don't Compete with Your Customers
Thursday, July 26, 2012 at 11:26AM Not all businesses are created equal. Some products and services are perceived as being more valuable than others. Usually the higher value accrues to the product or service that cannot be be built, produced or performed by the customer. For example, tax planning is generally regarded as requiring the experience, skill and professional tools available only to CPA's and tax attorneys whereas TurboTax can prepare a moderately complicated tax return for less than $50. Fifteen years ago both of these services were considered off limits to the layman. Today only one of them is considered the exclusive territory of degreed professionals.
Another example is the difference between a pool service company and a professional plumber. The pool service company provides convenience for a fee. If the homeowner is retired or has adequate free time it may not make sense to pay for convenience and a knowledge of pool chemicals. That knowledge can be acquired (possibly after the trial and error of recovering a green pool or two) and the time can be sacrificed. But a plumber is another matter. If one does not know how to detect a leak or how to acquire and use the tools to fix the leak no amount of time or trial and error will suffice to get the job done.
In your business you need to take a fresh look at your product or service through your customers' eyes. Is what you do something that your customer could do on their own with enough time or trial and error experience? If the answer is yes you will may face competition from the worst possible place, your customer. But that is not all. Competition will also come from other businesses who increasingly commoditize your product or service.
Ask yourself what features or modifications you can make so that there is little possibility of your customers being able to compete with you. The dry cleaner that is worried customers may start laundering their own shirts needs to find a way to make the service so convenient and worry free that leaving would be horribly inconvenient for the customer. Two ladies in my neighborhood have done this by creating a service that picks up the laundry every Thursday and delivers every Tuesday. I can't compete with that. Even if I wanted to do my own shirts there is no way I can match the convenience or time savings.
We have done this at Axiom by focusing on clients that desire strategic planning services instead of just tax returns. Sure they may be able to do the returns themselves eventually. Who knows what QuickBooks or some other software provider will innovate in the future. A day is probably coming where you can pay an extra $100 and have your accounting software prepare a business tax return for you. But can it help you put together a plan of attack and accountability to meet your 5 and 10 year goals? Probably not. That is something inherently suited to outside help. So we have invested heavily in it.
In the services world competition from your customer base can be just as fierce as it is from other businesses who do what you do. That is your fault. Build things that your customers value, but which they have no desire or ability to build themselves.
Reader Comments (6)
A 'convenience' service is more likely to be hit by economic hard times as customers may not have to spare income to afford their service. If a pipe leaks however there is no alternative but to get a plumber, no mater what the economic conditions.
I agree, Jon. But that is not really the argument I am trying to make. A plumber was probably a bad example, because you are right. There are some things we can't do without and the urgency of the situation requires that we can't do it ourselves. The point I'm trying to make is that no matter what business you are in your customer or the environment may change such that the customer can self service part or all of what you do. Especially in service industries innovation is a requirement to stay ahead of ones own customers. I was talking to a doctor this week who said that patient's access to medical information on the internet is the biggest change in the profession right now. Think about that. The profession that arguably requires the most schooling, credentials and compliance is finding that customers are taking it upon themselves to do things that only physicians did just a few years ago. To your point, patients are not going to suture themselves after an accident. They are going to go to the emergency room. But if they are diagnosed with something chronic the doctor has to take into account that they are not going to behave like clients of just a decade ago.
DON'T COMPETE ON PRODUCT; COMPETE ON CUSTOMER SERVICE
While the product may be commoditized, the service that you give your clients cannot be taken away from you, or replicated by your customers. Provide sterling customer service, and good things, including success, will simply flow to you.
I have seen this happen personally many, many times. The best businesses provide the best customer service, and this is what keeps them going, even if competitors may have a comparable product. I'll give you an example. I bought myself a trampoline from Jumpsport. Their product is better than everyone else out there. Maybe someone will come up with a comparable or better product someday. But the customer service that I get from Jumpsport every time I call them for any issue is simply the best that I have ever seen. They will go out of their way to satisfy me, even if they will lose money by honoring the request. This is the holy grail of success, do it well, and it will take you to the very top of whatever business you do.
http://www.RajDhawanCPA.BlogSpot.com
This was one of the problems I was running into in the Financial Planning sphere. So much of the stuff that used to be the realm of the paid, professional planner is now available to anyone with 5-10 minutes to spare.
Mutual fund risk/return comparisons? Highly diversified portfolios? Automatic rebalancing? All available, for free or a pittance of a fee. So the temptation was to get into areas that some couldn't spend the time doing: Day trading and commodity speculation.
Since I couldn't believe in these services, and also enjoyed the benefits of the cheaper, DIY types of investment options (like Vanguard), I found it hard to turn that part of the business into a profit center. So I stopped trying.
I agree with John. Many times customers can't pay for services. However, I do think that if we give professional services so potential customers know us over time and knew that quality has a price, even when there is competition in our niche. Don't forget that good reputation in the business is not built in one day.
In South Africa some businesses will always compete with the consumers because businesses does not always provide the high quality products and services they promise. Consumers pay high prices for these services to be delivered but its not on the quality they expected and the person that renders the service is also difficult to work with because of his or her inexperience of working with people.