A Tough Competitor

By Andrew Bass | Blog, Innovation, Strategy, Value Building

Your biggest competitor is often “We’ll do it ourselves” or “We’ll do without”. You address this by understanding your customer better. This is a totally different approach to competition from looking across at rivals and trying to do what they do a bit better and cheaper. In the first case you focus on the people with the need and the money, and on how to be more relevant to them. In the second, rivals focus on ‘the way the industry does things’, and risk drifting away from customers altogether.

We are, ourselves, regularly customers and clients of others. Ask yourself: “Why would I, as a customer, pay more to have someone else do it rather than doing it myself?” Here’s my list of top general reasons, given from the customer’s point of view:

  1. The opportunity cost saving makes it worthwhile. Most of us are not going to make and carry a flask of coffee on a business trip – we’ll let Starbucks or Costa Coffee take their healthy margin, and it’s still worth it for us to. By the same token, I know independent consultants who are former chartered accountants, yet they wouldn’t dream of doing their own books.
  2. The service provider does it better than you. Would you rather run your own maintenance department to keep a fleet of trains in service, or have the manufacturer do it? For the West Coast Main Line, it makes huge sense to let Alstom keep the Pendolinos in action.
  3. You may stand to benefit from the hassle reduction. Imagine if the people printing your product manuals would translate them into multiple languages for you at the same time. Xerox will indeed to that.
  4. You can reduce your risk. You can lease cars, aircraft or buildings and have someone else take the hit for unexpected repairs or other unanticipated costs.
  5. You can benefit from fresh thinking and innovation. If the provider is a specialist, they will have had more chance to think about the issues. This is a way that product companies can add valuable services such as design consultancy. International Automotive Component Group offered a major manufacturer the opportunity to make their new budget car seem more upmarket for the same cost, by using their innovative and efficient technology for making interior panels with a more sophisticated finish.
  6. You can get benefit from hard-to-get resources being bundled into the same deal. Lightpower – a company supplying lighting and highway services to major organizations – offers a lighting-as-a-service model which depends critically on its relationship with financiers to make available to customers an appealing subscription-based service.

So flip these round and apply them to your business. How can you do the following for your customer or client, and how can you communicate that to them? How can you:

  • Save them the opportunity cost of doing it themselves?
  • Do it so much better, because of your specialist knowledge, skills or processes, that even though they could do it themselves, they won’t want to?
  • Reduce their stress or hassle by looking after it all for them?
  • Reduce their risk?
  • Bring them fresh ways to serve their customers or otherwise improve their business?
  • Integrate your offering into attractive bundled solutions that they could never orchestrate on their own?

Any one of these could be enough to persuade a prospect against trying to do it themselves. In combination, they can unlock persuasive propositions that are irresistable.

© 2013 Andrew Bass. All Rights Reserved.