One of the hallmarks of a free market economy is that consumers have plenty of options and the freedom to choose from whom they’re going to buy. The challenge for businesses is to understand how and why consumers make their choices and then figuring out which consumers they want to have as their customers.
The number of factors that go into why a consumer will choose to buy from one business over another is immense. Trying to figure out all of the factors for your customers in your industry can be paralyzing, but the decisions can be simplified by understanding the three ways businesses typically compete in almost every industry. These three ways are quality, price, and service.
Competing using quality means your goal is to ensure that your products or services meet or exceed customer expectations. If you’re selling products, you’re selling among the best that are available to customers that are interested in peak performance or a fine attention to detail that sets those products apart from others on the market. If you’re selling a service, you’re providing quality results that other service providers aren’t willing or perhaps even capable of providing so that those results are obvious and hold up to detailed scrutiny. Ultimately, you’re providing results that will set you apart from others. Examples would include luxury car brands like Mercedes or BMW.
With price, your goal is to offer attractive pricing to appeal to cost-conscious consumers. You’re constantly looking at the market to see where others are pricing their products or services and doing what you can to keep prices down. Making sure your products or services are affordable even to people without much to spend is important. Wal-mart is a solid example of companies that focus on price.
When service is the focus, your business aims to provide exceptional customer care in order to build trust and loyalty. This can also mean offering quick response times, effective problem resolution, or more personalized customer experience to make them feel valued. Knowing people by name, offering special delivery options, or custom packaging are other ways that can set your business apart from others selling the exact same products. Southwest is well known for their level of service in the airline industry.
There is no rule that you must compete using only one of these. You can choose to add two together to set yourself apart even further. The ultimate combination is mixing quality and service - Nordstrom is well known for providing quality products and a staff dedicated to service. There are also examples of price and service being combined successfully, Chick-fil-A being one of them. Combining quality and price becomes a bit trickier, but has been done successfully by direct to consumer brands like Warby Parker.
It will be difficult if not impossible to combine all three and stay in business for very long. This is why it’s absolutely essential for your business to decide where they will best fit into the marketplace. It helps to look at the competition to see if they aren’t meeting the needs of certain consumers. Imagine a restaurant that has amazing food, but a staff that treats customers as if they’re doing them a favor by allowing them to eat there. Would a restaurant that had amazing food and a polite staff be able to draw business away?
Once the decision is made on which ways your business is trying to compete, other decisions such as marketing and advertising, staffing, product mix, etc. become much easier to prioritize and direct. This may not necessarily make them easy or quick to do, which is why bringing an expert in to help make those decisions is usually a good idea if you want to speed up the process and avoid costly mistakes. It’s also important to revisit these decisions over time as the market and industry change so your business can change as well. Remember… your customers have plenty of options and a major factor in keeping them as your customers is to make sure they choose the options you’re offering.
- John Thrush
