The Competition Doesn't Count!?!?!?

This old refrain popped up recently while I was interviewing for a consulting project. When asked about his competition and their impact in the marketplace, the business owner told me his philosophy: “The competition doesn't matter. Just do a good job, and the customers will come to you.”

I've heard this line before, and my response is 3 simple words:

Ba. Lo. Ney!

This attitude harkens back to a simpler, more gentile business environment. During the Eisenhower administration, maybe. But that was long ago.


Today, Your Competition Most Definitely Matters.

It sets the parameters for the conversation you have with your customers. Every one of your sales prospects has an idea of the products available in the market, and their price. Where do they get all of that information? From your competition.

• They listen to the ads,
• research their websites,
• and talk to their sales people.

If your competitors offer a similar product to yours for about $100, and you are priced at $120, your customers will be asking questions.

If the competitors have the product in stock, but you need 4 days to deliver, your customers will expect you to have a solid reason for doing things differently.

If the competition allows people to place their orders over the web, but you make them come in and talk to a sales person, your customers will want to know why.

The buying public won't allow you to operate within a vacuum. They'll evaluate everything you do in the context of what the competition does.

I read a great line recently: “we live in the age of transparency”. That is absolutely true in the sales environment. Your customers are familiar with your competition, their products, services and prices. And that frames the conversation when you begin your sales pitch.

So how do you operate effectively in this atmosphere? You need to arm yourself with two critical sets of information:

1. An understanding of your primary competition, and how they are viewed by the buying public.
2. Some key points of differentiation that will help your prospect see you in a different light, and perhaps justify increased margins.

Those two statements are simple to write, but might take a small business years to master. However, in them lies the difference between being a top contender in the marketplace and being just an also-ran. The competition sets the parameters of the game. How well-equipped are you for the challenge?

Practical Tip of the Day:

• Don't ignore the competition; embrace the challenge.
• Do a “shelf-space” analysis of your competitors, inside the head of your customer base. Do some extensive interviews with customers and prospects. (If you are the Boss, do this yourself. Don't delegate!)
• Figure out why you aren't considered at the top of the list, and develop a plan for the next 12 months.

HOWEVER, don't try to become #1 by mimicking the current #1. But more about that later.

The “Main Thing” Thing

Stephen Covey passed away this week. Famous for his book “The 7 Habits of Highly Effective People”, Covey became well-known for his views on building values and principles into you daily life, at home and at work. He published 4 books, ran a successful seminar program, and founded the Covey Leadership Center.

It seems appropriate, therefore, to return to an underlying theme that runs through both his writing and mine: A clear focus beats a shotgun approach every time.

I had a conversation with a another consultant recently, and I came away surprised. I asked about his work, and he told me about the variety of projects he handles. I was waiting for his concise Aural Business Card (Click Here for post ), but instead I got paragraphs about his services, covering:

• HR and labor issues
• Team building
• Family business succession, and
• Enterprise system implementation.

I was amazed / floored / skeptical / amused. This guy obviously didn't buy into my “Focus is Everything” philosophy, and I didn't try to convert him.

I was reminded, however, of that great line penned by Stephen Covey:

The Main Thing is to keep the Main Thing the Main Thing.

What a fabulous piece of writing. And, as you may have read in an earlier post (Click Here for post) I absolutely agree. The secret to long-term success in small business is FOCUS.

• Find one thing you do well,
• that customers are seeking,
• that the competition doesn't bother to do,
• and make that the “Main Thing.”

An executive's job is to see that the company resources (time, money, brainpower, management bandwidth, etc.) are focused on this primary objective and don't get squandered on unimportant side issues. The sales people will want to chase after the last deal that walked in the door. Manufacturing will want to produce new products that fit in with their production line. Product Development will want to design something new and cutting-edge. Everyone wants to head off in a different direction.

Its the boss's job to keep them together on the same path, and headed toward the same goal. It is hard to do, but fragmentation of effort will destroy your brand and your margins.

If you don't have a “Main Thing”, start looking now. Your competition may not have one either, but you should assume that they are working on it. (Andy Grove's book title said it all, “Only the Paranoid Survive.” But that's another post.)

Like the man said: “The Main Thing is to keep the Main Thing the Main Thing.”

Words to Live By!!

For more about Stephen Covey and his writing  Click Here.

It Really Isn't all about Price!

Here is a little drama I come across, seemingly weekly.

The Boss: “My sales people don't know how to sell anything without a discount. Every day, they come to me and want lower prices in order to match the competition. They aught to be selling on our great features, not price.”

The Salesman: “ The Boss won't give us anything we can sell with. The competition is eating our lunch with better pricing, and we are losing a lot of deals.”

Enter the Consultant, who is supposed to save the day. After a little research, I find that both sides are correct to some extent. However, they'll never come to an agreement, because the issue is improperly framed. Here is the reality:

If you get to the end of the negotiating process and are losing deals on price, you actually lost the deal much earlier.

In a previous post, I wrote about how shoppers are looking for an answer to The Big Question (Click Here). In short, when shoppers are early in the buying cycle, they are looking for a reason to buy from you. Specifically, they want to know, “Why should I buy from you, rather than 6 other companies that do the same thing?” And they will continue shopping until they:

• Run out of vendors
• Get tired of shopping
• Find a good answer to The Big Question
• Run up against their buying deadline.

When your prospect gets to the end of the buying process, and only wants to talk about price, it means you didn't give him any other reason to buy from you. In that environment, it is hard to close deals, to build customer loyalty, and to maintain reasonable profit margins.

You can avoid this situation by giving your prospects some good reasons to buy (beyond low price) that set you apart from the competition. Is this easy? NO! But it is much better in the long run than cutting your margins to shreds.

Simply put, here's what needs to happen to get out of the never-ending cycle of price cutting:

If you are The Boss: It's your job to create significant value points (that are meaningful to your customer base) that set you apart from your competitors. It's also your job to see that this extra value is actually delivered to your customers, and not just talked about.

If you are The Salesman: It's your job to mention, re-enforce, and demonstrate the benefits the customer will get from those extra value points, and remind the customer that they make your product worth that little extra in price.

Now, Here is some Good News!

If, in the current scenario, you are always having to compete exclusively on price, it means that you haven't succeeded in giving the prospect a good non-price reason to buy from you. So, where's the good news?

It also means your competition hasn't done a very good job of convincing the prospect of their extra-value proposition either.

That's where your opportunity exists. This window may not last long however. Your competitors are probably working on this project right now.

Practical Tip of the Day:

1.) Talk to you salespeople. Get them to develop a list of what you offer, or could offer, that would set you apart from your competitors. HOWEVER, think of this list as just a starting point. Salespeople (even the best of them) tend to think in the short-term, and are influenced by the last customers they spoke with.

2.) Talk to your best customers. Put together a list of you best 15 accounts last year. Cross off the top 5 (who may represent special circumstances, and not be typical of your overall target market.) Go out and meet with the rest. Take them out to lunch. Ask them what they like about your company / products / services as compared to the competition. They'll have some useful opinions to share. Getting those opinions directly from the customer is far superior to just hearing them (in filtered form) from your sales staff.

3.) Talk to your suppliers. Especially the ones that sell to your competition. What do they see going on in the industry? What innovation have they been impressed with? It is amazing what people will share when you ask their opinion.

4.) Finally, use you instincts about where the market is going. Put all of this together and create some distance between you and the competition. This will improve both sales and margins, and make things fun again.

Wisdom from the “World's Meanest Boss”

I read somewhere recently that Harold Geneen, one of my favorite corporate executives, had made it on an all-time list of the World's Meanest Bosses. Geneen ran ITT back in the 60's and 70's, when size meant everything and conglomerates were the rage. He developed a reputation for always hitting his forecasts, and being impossible to work for.

Mean or not, he had some keen insights into the business world which I have benefited from and which I will share here, along with some Small Business applications.

Seeking the Truth

Geneen was famous for his monthly executive meetings. They were grueling, multi-day, 14- hours-a-day events , where he would grill his divisional managers about their performance and expectations. He would go through their reports line by line, looking for the facts. Or, as he called them, the “unshakable facts”. He went to great pains to sort out the opinions, and guesses, and hypothesis, and suppositions, and biases and wishful thinking, to get to the “unshakable facts”. I imagine he found them few and far between.

I bet you experience the same thing every day. People come to you with information, and want you to make a decision. Unfortunately, much of that information is false, or assumed, or only partially accurate. A long way from being “unshakable”. Obviously, if you get poor information you will be making poor decisions. If you want to make better decisions, the information, and the information source must be analyzed. (Geneen felt that was best done in-person, hence the endless monthly meetings.)

Boiling information down to unshakable facts, as presented by your employees, requires a lot of work. Lazy managers don't bother: they just accept with they are given, and blame their staff when things go wrong. A strong manager is always skeptical, until proof is provided. The stronger the facts, the better the decision-making.

The Greatest Executive Disease

Geneen came from the corporate world of the 60's where, as depicted on the Mad Men series, all serious businessmen had a bottle of booze in their desk drawer, and the senior executives drank expensive scotch. It was in this environment that he developed his famous quote about the Great Executive Disease:

“The worst disease which can afflict business executives in their work is not, as popularly

supposed, alcoholism; it's egotism.”

What a fabulous insight!!! Executive egotism has ruined more businesses than alcoholism and drug addiction combined. Not only is it more powerful, it's harder to recognize. People suffering from serious substance abuse are easy to spot in the workplace. The signs identifying an ego-driven executive are not as obvious. And too often, its the Boss: who's going to call him out???

Small businesses are run by entrepreneurial types, and a healthy ego is a prerequisite for success. Too often, however, the decision-making groups in these companies become “inbred”, and the executives end up believing their own press releases and reliving their past glories. The executive ego attitude of “my ideas worked in the past, and they'll work in the future” has caused many a business to lose its edge and its position in the marketplace.

Organizations that are successful over the long haul have mechanisms to constantly inject new blood and new ideas into their decision-making counsels. It is hard on the ego, but good for the business.

Practical Tip of the Day:

• What is the primary USP (unique selling proposition) that you are using in your marketing today? How does that compare with the message you used 5 years ago? (For more about the USP concept,  Click Here. )
  
• If it is the same, that could be an example of missed-placed ego. Just because it was your idea and it worked, doesn't mean it is still applicable.
  
• If you dig for the unshakable facts, you will find that the market has changed. So should your message.

For more information on Harold Geneen and ITT, Click Here. Or better yet, read one of his books.