Who’s the leader?

Not sure who the leader is in your industry? The best time to figure this out is in the midst of an economic slowdown.

Not sure who the leader is in your industry? The best time to figure this out is in the midst of an economic slowdown.

It’s at times like these when many businesses buy into the strategy of price reduction. But astute business leaders know that price reduction is not a strategy, it’s an identity crisis. Reducing prices in the midst of a spending slowdown is a double loss.

Leading companies are not even playing the same game. Why? Focus. Instead of getting caught up in price reductions – or what the competition is doing – they create a completely different path. The most successful companies continue to cash in on the strength of their products by clearly identifying and voicing the value of their products and services to their customers. In times of economic pause, the best move is to focus on product differentiation, and increase customer satisfaction.

From the two paths below, decide for yourself whether or not your company is a leader.

Path I

Problem: Profits are down and customers are not rolling through the doors.

Solution: Relax, all the competition is faltering right now, too. It must be an industry-wide slowdown. Blame the economy.

Problem: The competition decides to jumpstart their business by decreasing prices.

Solution: Drop your prices to match your competition.

Problem: Customers are not responding to the decrease in prices.

Solution: Drop prices a little bit more and make some employee cuts to balance out the cheaper product.

Problem: New company emerges and is experiencing great profits. It is taking your customers and customers from your competition.

Solution: Study the competition and figure out what they are doing and match their innovations. Drop prices more to win old customers back.

Problem: Prices are too low and profits are below expectations, despite regaining customers from competition.

Solution: Rally all employees together to brainstorm what the next big customer need will be before someone else figures it out before this horrible downturn continues.

The type of company who travels down path I has forgotten about the most important source of information: the customer!

The reality in path II is quite different because, while some attention is given to competitors, the focus is on customers.

Path II

Problem: Profits are down and customers are not rolling through the doors.

Solution: Meet with a customer advisory board to find out why business has declined.

Problem: Customer advisory board indicates dissatisfaction with all the individual segments of your product that must be purchased in order to have the product function correctly for them.

Solution: Bundle your products together and make your packages of value to the customers by making the package less expensive than the cost of buying the individual pieces.

Problem: The competition gets a hold of the idea and begins to duplicate the process.

Solution: Brand your business process with terminology and create a repeatable slogan so your customers will know who you are and what differentiates you from other companies. Put your slogan everywhere.

Problem: Competitors are taking notice of changes and following suit.

Solution: Meet with customer advisory board to determine their expectations in standard of service. Benchmark customer response in your industry and become the standard.

The realities presented in the two paths are very different. The three most important elements of scenario two are:

Build an Advisory Board

In order to know the pulse of your customers, it is imperative to learn from them on an ongoing basis. To build a voice to help focus your efforts in the right direction, develop your board from three different types of customers. First, recruit premium customers, or those who have the highest need for your product and are influential to others about your product. Second, recruit high-end vacillating customers. These are customers who are best able to be educated about the benefits of your product and can most easily be moved into the premium customer category. The final element of your advisory board is the potential customer, those who have potential to be premium customers but are currently doing business elsewhere.

Branding Yourself, Product, or Service

Companies on top know how to accomplish branding. They define terminology, own terminology and place that terminology everywhere. Create a slogan that connects with the customers and communicates your distinctiveness in the marketplace.

Benchmark Your Process

The most effective step in creating distance between you and the competition is to define at what level your company is able to deliver something consistently. By knowing the pulse of your customers, your company can deliver at the expectation level that will set a standard and leave competitors chasing you.

The difference between paying too much attention to competition and acting on the voice of the customer is the difference between first in the industry and middle of the pack. By putting customers at the top of your list, they will put you at the top of their list.

Adapted from Full Price: Competing on Value in the New Economy (Dearborn, 2000), written by Thomas Winninger, founder of the Winninger Institute for Market Strategy based in Minneapolis. For more information, go to www.winninger.com. Winninger can be reached at (952) 896-1900 or thomas@winninger.com.