Understanding the Added Values You Provide Customers

Your customers, or would-be customers, need to be informed and
reminded of what added values you provide them — extras that can save
them money, time, and aggravation. Yet too many business owners and
managers can be ignorant of what those competitive advantages are. The
seafood supplier didn’t communicate that he was selling fresher salmon
with longer shelf life, and thus enhancing his customers’ bottom lines,
until a competitor threatened his market share.


You
could be providing a lot of extras to your customers without realizing
how much you are actually saving them. Or, if you do not provide
meaningful extras now, you might consider adopting them. They can be
critical competitive advantages.


Consider the following:

Terms

If you are a small or medium-size company up against a category
killer, you might have flexible financing terms that the big guys can’t
match. For example, a lumber company in the Northeast enjoyed a robust
business with little substantial competition until Home Depot began to
close in. One Home Depot box opened twenty miles away, and then another
just ten miles down the road. Observers predicted that the lumber
company would soon be bulldozed out of business.


Surely, it couldn’t compete on price, not against Home Depot’s buying
power. Lumber is lumber. So it concentrated on hitting Home Depot where
it was vulnerable. It offered more — flexible credit arrangements for
its most important customers — small contractors who often lack lines of
credit from banks. The lumber company didn’t have to drop its prices to
stay in business. It adopted new competitive advantages.

Guarantees

It is common for attendees at my seminars to tell me that their
companies are “the only ones in our industry offering multi-year
guarantees” on their products. But when I ask if they make a big deal
about the guarantee to prospective buyers, most admit they do not.


The reason is usually the same: “If we emphasize the guarantee, too many customers may take advantage of it.”


That’s a pretty lame excuse. Either you offer a guarantee or you
don’t. If you are confident enough in the product to guarantee it in the
first place, make a selling point of it. Statistics show that a very
small percentage of customers in any business actually use the
guarantee. But the guarantee takes a lot of risk out of the buying
decision and clinches a lot of deals.

Inventory turns

One of my favorite stories about inventory turns involves a clothing
manufacturer who sold women’s clothes to boutiques around the country.
When I asked him what differentiated him from his competitors, he said
he thought his clothes were “wearable.”


“As opposed to what?” I asked, trying not to laugh. He began to talk
about design, fabric, cut, and so on. When I queried what his
competitors we’re saying, he shrugged and said, “I suppose the same
thing . . . but I know my stuff sells much better.”


I asked him what his customer, the boutique owner, cares about most.
“Whether or not it sells,” he said. So I asked if his shop owners
measured inventory turns. He answered that some did, some did not. I
suggested that he teach them how to measure inventory turns and then he
could prove to the shop owners his clothes sold better. My point was
that he should stop selling “wearable clothes” like everyone else and
start selling inventory turns. Moving the goods is what matters.


Note: Be sure you can back up your boast. Your buyers will know soon
enough if you can’t. As with any competitive advantage you claim, make
sure you deliver.

Materials

One client in the home-improvement business who sold siding knew his
product was “stronger and better” because of the materials he used. But
he didn’t know how to convey that without sounding biased and
subjective. Upon asking his employees a series of questions I learned
from one of his engineers that the company’s product has a higher wind
load rating than any competitive product. In many geographic markets,
the higher load rating influences buying decisions. So if your materials
are stronger and provide customers with a benefit, shout about it in a
way that is measurable.


Delivery. If you provide the same product as your competitors but you
offer better delivery service, you have a competitive advantage. But
how important is it? The Compleat Company, which sells promotional
products, decided to find out. The Seattle-based company polled its
customers about the importance of its on-time delivery. It found that
its customers not only valued that service highly, they had a pretty low
tolerance for being late.


Eighty-eight percent of its customers defined “on-time delivery” as
being on schedule 97 percent of the time or better. Only 4 percent of
its customers would accept an on-schedule rate of less than 93 percent. A
manager from Compleat told me that the company is now focusing its
energy and resources to make sure it meets that expectation. When
Compleat’s customers want their deliveries, they will get them.

Information

In business as in war, intelligence can be priceless. In Business @
the Speed of Thought (Warner, 1999), Bill Gates writes: “The most
meaningful way to differentiate your company from your competition, the
best way to put distance between you and the crowd, is to do an
outstanding job with information. How you gather, manage, and use
information will determine whether you win or lose.”


Knowing what your competitors are doing, and keeping up with trends
in your industry, are basic forms of intelligence, and essential if you
are going to run a successful business. So is listening to your
customers. (Your own and your competitors’.)


The more competitive the business you are in, the more important the
role of intelligence. You can’t afford to get caught flat footed if,
say, a labor strike shuts off deliveries of critically needed material.
Or if commodity prices suddenly spike or drop. Or consumer confidence
sinks. Or if new products being developed by your competitors threaten
your markets.


No matter what business you are in, failing to keep a weather eye on
changes in your industry can be fatal. A lot of this “intelligence” is
hardly proprietary. It simply amounts to smart business practices born
out of experience. If you are a B-to-B supplier who sells to retailers,
your customers’ success determines how well you do, too. Your experience
can help your clients avoid common mistakes.


Small and medium-size businesses are often in the dark about key
developments in their industries. They lack the time, money, and
expertise to gather and evaluate that information. But that doesn’t mean
it isn’t important. Consider the prices they pay for the goods or
services they buy. Advance word of radical price shifts, or new products
that will make others obsolete, can save them from missing a buying
opportunity, or from laying in inventory that will soon become obsolete.


Keeping your customers informed of trends can only make them
healthier, and in turn create more business for you. Word of mouth from
your sales force is one time-honored way to accomplish this. But in this
age of the Internet there are other effective ways, too, from e-mail to
Web sites that keep clients posted on prices and other industry
developments.


One of my former clients, the Institute for Trend Research, in
Concord, New Hampshire, analyzes market and economic trends and makes
accurate predictions as to when those trends will change. Its business
is its forecasting expertise in a wide range of sectors, from industrial
construction and agricultural market movement to interest rates,
commodity prices, and inflation.


Subscribers to the company’s publication EcoTrends get an important
bonus: a discount on EcoCharts. EcoCharts, using raw data that the
subscribers provide themselves, tells them which indicators included in
EcoTrends correlate best to their specific businesses. ITR has defined
four phases of economic movement; if the trends that affect your
industry are in Phase C, then you are expecting a downturn. Your actions
might include a reduction in inventory and training, an avoidance of
long-term purchase commitments, and deeper concentration on your cash
and balance sheet. On the other hand, during Phase B, an upward trend,
you would accelerate training, increase prices, consider outside
manufacturing, and open distribution centers. This kind of information
can provide companies with powerful competitive advantages.

Training

Many large companies offer specialized training for their customers,
free or at cost, so they can run their business better. McDonald’s runs
its own academy for new franchise owners, for example, so they can learn
to avoid common pitfalls and maximize the return on their investments.
The company draws on the experiences of thousands of other franchise
owners and shares that knowledge, because it is vital to their own
business. I often recommend to clients that if they invest heavily in
training they should make a competitive point of it. For example, “We
invest half a million dollars each year training our employees” or “. . .
training our customers.”




Excerpted from Creating Competitive Advantage: Give Customers a Reason to Choose You Over Your Competitors
by Jaynie L. Smith with William G. Flanagan Copyright © 2006 by Jaynie
L. Smith with William G. Flanagan. Excerpted by permission of Currency, a
division of Random House, Inc. All rights reserved. No part of this
excerpt may be reproduced or reprinted without permission in writing
from the publisher.