How to be competitive this Christmas, and every day thereafter

Awhile ago I met a guy, we’ll call Pat, who was running a pest control business. Pat told me how the business, which had been quite successful in the past, was now in rapid decline. He explained how they had lowered their prices to win more work but were still failing to convert prospects. “What am I meant to do?” he said “We are dirt cheap now yet still too expensive.”

I asked him how he knew they were too expensive. “It’s obvious isn’t it, the customer picks another supplier over us?”.

“Have you ever actually asked them?” I said. “Well no,” he replied. So I suggested that over the next month he ask every prospect that failed to convert into a sale why they hadn’t chosen his business.

At the end of the month Pat was astonished. Not one single potential customer had named price as the reason for not buying. Rather the most common motivation for picking a competitor over Pat’s business was the speed of turnaround of the quote.

This story isn’t a one-off, I have many more with different details but a consistent theme is that small and medium sized businesses believe the path to success is built on being the cheapest.

The trouble is that cutting prices is the lazy and often doomed path to being more competitive. Businesses do it because the alternative – exceptional service – is hard work. But is there an option? I don’t think so. Small businesses in particular rarely have the purchasing power to enable them to be truly price competitive. So excellent service has to be the answer.

At the other end of the scale I was interested to read this week that Zappos.com, the online shoe retailer recently purchased by Amazon, announced they were moving away from competing on price saying that their business was all about service and experience, and therefore that was where it was investing its marketing dollars.

And that’s the key. Exceptional service is about investing. Investing in people, training, systems and guarantees. And it is a much more fruitful investment than absorbing the cost of price discounting.

Pat redesigned his business to put speed of proposal-turnaround as the number one deliverable by the business. It meant he had to hire an additional employee, but it didn’t take long to cover that cost. Oh yes, and determined not to make the same mistake again, they always ask prospects “why” if the business loses a proposal.