Finding Effective Business Discriminators-Jun 2010

By Sandy Smith

I asked, “Why should I give your company my business?” I was in Fort Lauderdale, Florida, where I had been invited to speak at a floorcovering sales conference. The attendees all worked for one of the 11 branches and showrooms of the same company. Sales had been down in the floorcovering industry like it had in all construction-related enterprises.

In addition, competition was intense, not only from other storefronts in the same and neighboring towns but also from online businesses that sold a huge selection of floorcovering materials at a reduced price, delivered free, and with no sales tax. So the question of the day was, indeed, “Why should I do business with you?”

Initially, the audience was silent, obviously pondering the question, searching for good reasons. Then one intrepid sales manager boomed out with confidence, “The quality of our products is the best in the industry.” As I dutifully wrote the reason given on a dry-erase board, more responses began pouring out as the audience warmed to the task, providing good reasons one after the other as if they were reading from their own marketing brochure.

“Our employees are committed to first-class service,” said someone. “And we listen to our customers,” amended someone else immediately.

“We have been in business for 35 years,” added another.

Someone in the back shouted out, “Our showrooms are state-of-the-art.”

Confidence abounded in the room as the audience nodded at answers given by their colleagues and voiced their own. It seemed as though the collective audience response offered more than enough rationale for every floorcovering customer in their respective territories to walk into the nearest showroom and plunk down their hard earned cash. The attitude in the room was clearly, “We’ve covered that point, so let’s move on.” So I did.

“I had an opportunity last week to interview the sales leaders of your two largest competitors,” I said. “I asked them the same question and got the very same responses.”

Profound silence again. It seemed as though we were suddenly back at square one, “Why should I do business with you?”

I had lied, of course, about interviewing the competitors, but I have no doubt that if I had done so, I would have received the same “motherhood-and-apple-pie” responses that managers of virtually all U.S. companies espouse but very few embrace to a degree that distinguishes them from their competitors in the minds of consumers. Therefore, merely printing platitudes in the company brochure, hanging “motivational” posters on bulletin boards and in elevators, and dragging new employees through “rah-rah” in the orientation session gets you roughly back to dead even.

So how can your company distinguish itself from competitors and offer consumers a compelling reason to do business with you on a consistent basis and recommend your company to family and friends?

Putting Principles into Practice
First of all, none of those points my audience made in Fort Lauderdale were off the mark. It’s hard to conceive of a business doing well in the marketplace without a quality product available for consumers to see in a comfortable environment and whose advantages are presented clearly by a knowledgeable, customer-focused sales team. The problem is that, even though everyone says the right things, almost nobody does them. Simply put, saying and doing are different things.

A colleague of mine told me about a frustrating buying experience that started off really well and ended up with him crossing off an auto dealership from future business forever. He said that he was interested in a certain make and model and, while browsing on the Internet, indicated his interest on the company’s national website. Almost immediately—and it was on the weekend—a phone representative from the local dealership called, interviewed him about his interests, likes, and dislikes, noting it all down, and made an appointment for the following week. The phone rep said that he would be greeted at the door by a sales rep who would be thoroughly aware of everything discussed during the phone call, including the options my colleague wanted on the car and the kind of deal he would accept. The phone rep said that their dealership wanted my colleague’s business and would make the experience no-nonsense, straightforward, and brief.

When my colleague and his wife, who took off early from work for the occasion, walked into the dealership at the appointed time, nobody greeted them. All sales personnel in sight were either eating lunch at their desks or were engaged in conversations with one another. Finally a young salesman approached and said, “Can I help you?” My colleague explained that he and his wife were there for their appointment.

“You must be wrong,” the salesman said. “We don’t make appointments that way. But since you’re here, what do you want and how much are you willing to pay?” To set the record straight, he added, “We probably won’t take any off the sticker price and you might have to pay a premium.”

My colleague and his wife left abruptly, went across town to another dealership, and bought the car they wanted at the price they expected to pay on that same day.

How often have you been convinced by a commercial to go somewhere and try something, only to leave thinking, “Have these people seen their own advertisements?”

So the first step in setting yourself apart is to believe in and practice your own business principles from the top to the bottom of your organization. That will help substantially, but it probably won’t get you where you want to go with your business.

Knowing Your Customers
What will get you there is knowing your customers and then differentiating your business, in their minds, from your competitors. What do they like and dislike about purchasing the kind of products you sell? What motivates them to buy and what turns them off? What questions will they have and can your staff offer factual answers they can understand? What is important to them about their buying environment and experience? And what can you do to meet the needs of your customers better than anyone else?

It’s likely that somebody on the front line of your organization knows the answers to at least some of these questions. They know what people bought and what they didn’t and why. They know what people were looking for and didn’t find. But do people in your organization listen and adjust accordingly?

The fact is that businesses that truly know their customers have no competition.

You probably also need to look outside your industry to find business models that offer you clues to improving your own chance for success. In his bestselling book, The Fifth Discipline, The Art and Practice of Learning Organizations, Peter Senge said, “90% of what you need to know to be successful in your business is information outside your industry as you know it.” So why not study and learn from the “best practices” of successful companies in other industries? (You can also learn from considering “worst practices” wherever you find them.)

Extra Charges and Fees
Let’s take, for example, Blockbuster, the movie rental chain that put out of business mom and pop video rental stores across the country and bought out a long list of substantial competitors. By 1993, Blockbuster had more than 3,400 video stores worldwide. But there were long waits for the latest releases, plus, at some point along the way, Blockbuster initiated a practice of charging what could amount to hefty late fees.

In 1997, along came Netflix, where users could order movies online from the comfort of their home and receive them promptly, typically the next day. And, very significantly, there were no late fees. Now, Netflix has over 13 million subscribers and Blockbuster, according to a February 2010 Associated Press story, has “suffered a fourth-quarter loss of $435 million as its video rental stores struggled to attract consumers who are increasingly getting their movies through the mail, vending machines and high-speed Internet connections.”

Then there’s the example of Southwest Airlines. To increase revenue during the recession, most airlines began charging customers for checked bags. A family checking three bags might have to pay $100. To add insult to injury, Spirit Airlines shocked their customers by charging for carry-on bags.

In contrast, Southwest Airlines CEO Gary Kelly decided that charging customers for their bags would go against the reputation Southwest had built over the years and subject employees to the wrath of frustrated customers. So as announced by Southwest employees in a colorful series of TV commercials, “We love bags,” and “Bags fly free.”

In April 2010, Southwest Airlines reported $11 million in earnings for the first quarter and, according to Kelly, had grabbed nearly $1 billion in annual marketshare.

“We’re beating the pants off everybody in terms of our revenue production,” Kelly said. “We have fewer seats offered every day, and we’re carrying more passengers. We’re defying gravity.”

Swimming Upstream
In many cases, configuring your business so that it connects with customers may go against the conventional wisdom of business pundits, including those in your industry. Wall Street viciously attacked Mike Kelly as “irresponsible” for Southwest Airline’s position on free bags.

Use your own experience as a guide. You and your family make dozens of sales decisions a week. Why do you buy groceries, clothes, appliances, books, and tools where you do? Why do you eat at certain restaurants over and over again? A friend of mine wanted a cup of coffee one morning and asked me to pull into a Pilot’s convenience store. Curious, I asked if she thought the coffee was better there than at other places. “Not really,” she answered. “But it’s pretty good and the tops on those cups are the best. They are easy to use and never spill, and nobody else has them.”

How many of your decisions are based on the best ice in cold drinks, a comfortable place to sit, an especially friendly employee or a terrible one?

Being Smarter
I once heard a story about Albert Einstein when he was a professor at Princeton. He was visited by a student who said, “The questions on this year’s exam are the same as last year’s!” Einstein replied, “Yes, but this year all the answers are different.” The lesson for any business is “the rules have changed” and yesterday’s answers may be obsolete in today’s rapidly changing market. The secret to increasing your traffic and closing sales is not just a matter of “trying harder” as much as it is “being smarter.”

Companies like Netflix and Southwest share three traits that differentiate them from their competition: they know their customers; they anticipate their customers’ unarticulated needs and wishes; and they know that playing it safe is risky, so they are willing to think big by being imaginative and innovative. Are you willing to swim upstream far enough to discriminate yourself in your industry?

Why should I give you my business?

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