Archive for 'example'

Product Differentiation

I frequently get asked “how can I differentiate my product or service when there are a lot of competitors doing the same things on a similar level?” My initial answer is ‘you just answered your own question within the question.’ That part about “a lot of competitors doing the same things on a similar level” should clue you in as to exactly how to differentiate yourself–vastly outperform them!

There’s only ONE low price leader. Once someone establishes themselves as the low cost provider, that game is over so it’s time to focus on differentiating in other areas under your control. It’s truly not that difficult, but it requires an ability to step back to reflect objectively and a common sense approach moving forward.

For example: I have worked for two systems integrators within the past five years. They are very similar in their product mixes (both are Nortel Distributors) and their current marketing strategies, but they couldn’t be more different in the way they approach the operation of their businesses. For starters, one is an old school distributor (we’ll call them Company A) and views things historically (several “glory days” stories pepper the organization) more often than not. They will frequently thump their chest while stating they were one of the original Nortel Distributors in the Southeast and have been doing this for 33 years, their business model works fine, there’s no reason to partner with other firms, and so on. Company A believes in soaking the customer for as much profit as they can on the front end in fear that they may never see another dime out of them. Their apparent belief is that if they don’t see another dime, they got their piece of the pie so who cares? To them, customer loyalty value is merely a cliché that can’t be justified on the income statement. Additionally, they are very old school in their approach to new customer generation. They still rely on cold calling quite heavily, don’t view the customer as a potential partner, and are oblivious to the benefits of community involvement to increase word of mouth marketing.

Company A won’t capitalize on the benefits of educating their workforce out of fear employees will leave for greener pastures as soon as they achieve an industry certification. Only when the manufacturer implements minimum educational requirements in order to remain licensed does Company A enroll employees into educational programs, and they do the bare minimum to maintain their license. It’s no wonder the place has the fears it does–it created them as a result of their own culture based mostly on greed. I rarely question my motivation to leave Company A, but I frequently question my decision to accept the job in the first place even though I learned a lot about what NOT to do in business as a direct result of having worked there. The positives I will say for Company A are: 1) they have some good people working there–just not enough of them (probably because they are cheap and lack long term vision), 2) they have a good manufacturer behind them even if Nortel has had its problems over the years and 3) they have soaked enough customers to keep the doors open for 33 years so they are doing something right even if the underlying motives are a bit skewed.

Side note: I’ve offered to work with Company A to help them improve things, but they view me as an evil ex-employee whose motives must be misplaced/misguided. Besides, what could an established distributor of 33 years possibly have to learn from little ole me? Never mind improving the business–that’s unnecessary!

The other company, Company B, actually listens to their customers, employees, and outsiders to try to improve their business as much as possible. They view the customer more as a partner than a means to pay expenses. Their mantra is to build a third standard deviation company. Company B truly wants the employees to succeed and improve themselves. They realize that the more expertise they have on staff, the more valuable their services become. When people leave, they don’t leave scratching their heads as to why they ever spent a day there to begin with, and they don’t trash the place to their friends, colleagues or current business associates.

Of the two companies, which do you think someone would be more inclined refer to a friend, colleague or business associate? Which has that word of mouth appeal? Which seems poised to grow? All of these things set one company far apart from the other in spite of providing similar products and services. Much of it starts at the top, too. If you have a dynamic leader guiding your company, you can efficiently seize market opportunities to differentiate yourself regardless of how many competitors do the exact same thing you do today.

Doing something much better and valuing your customers are distinct advantages that will lead you to the winners circle in time.

When Your Salary is Too High

Once again, I’m overly frustrated with UofL’s basketball program. We lost to UMass at home last night which makes our record 1-2 versus Atlantic 10 schools this year. Before I get into this, UMass has a nice squad, but they shouldn’t be marching into Freedom Hall and taking home a victory. This comes on the heels of a rather poor showing over the weekend where the Cards played three mediocre teams in three days (all at home) and struggled with each one of them.

Usually, I try not to call people out, but it’s time to address the issue head on. Rick Pitino has lost his fire to coach I’m afraid. He made a ton of money with the Celtics, he’s getting $2 million plus per year here, and it’s deadened the value of a lucrative salary as motivation. He’s made it already! He’s not hungry like he was at UK or Providence. Yes, he took Louisville to the Final Four two seasons ago, but last year’s team and this year’s collection of athletes look absolutely lost, they don’t defend well like “typical” Pitino teams, there is no improvement noticeable, and the player rotations leave the majority of fans scratching their heads.

This is a prime example of someone’s salary being too high which shows in the final product. Would your company allow its leader to get away with this? If so, what about that particular person allows them to get away with such? If they own the company, that might explain part of it, but they would eventually be forced to sell or retire if their objective was to keep the company afloat.

If a major corporation repeatedly missed its numbers, and the CEO gave flimsy excuses every time as to why, that CEO would be replaced. That’s all I’m asking in this situation–hit your numbers (Rick) and honestly tell the public what is going on. Enough with the excuses and mind games–we’re not falling for it anymore. The product you’re producing is very below average, and it’s not delivering the value your customers paid for and you promised.

Many have criticized me for taking such a hard stance on this topic so early on in the season, but I took a similar stance during Denny Crum’s last season–it’s either the coach gets replaced or my season tickets will not be renewed. It’s come to this unfortunately. I was very excited when they hired Pitino, and I was thrilled with the Final Four run, but I refuse to waste my time watching a piss poor product that costs a lot of money for two straight seasons. The value equation is all out of whack, and that falls back on the CEO (head coach). It’s his “corporation” to run. He’s CEO of the basketball team, and he’s paid very handsomely to be that. He’s no different from Bob Nardelli at Home Depot or Terry Semel at Yahoo! They need to go too.

If you have a better solution to this dilemma, please share it.

Leveraging Better Competition

Most people who know the least bit about me know I’m a huge University of Louisville athletics fan, and I’m also an avid cyclist. I’ve been a season ticket holder for UofL football and basketball for over ten years, and I’ve been involved in organized cycling for seven plus years. It is through these two interests in conjunction with a childhood of playing competitive baseball I have developed a strong appreciation for the value of solid competition. It has also taught me that in order to achieve improvement, you need to compete against those stronger/better than you.

This Thursday’s West Virginia versus UofL football game is a case study in the value of strong competition. Last year, Louisville (and others) joined the Big East Conference, and many said it was a conference undeserving of a BCS bowl bid and was a severely watered down football product. Nobody questioned the level of competition in basketball, but the losses of Miami, Boston College, and Virginia Tech in football was supposed to be too great a hurdle to climb in terms of bonafide respectability. Nobody was counting on Louisville and West Virginia raising the football bar to Top 5 levels so quickly. West Virginia comes in ranked #3; Louisville #5. The high level of play by both programs already has forced programs like Rutgers and Pittsburgh to improve, making the overall conference a pretty formidable league all of a sudden. Syracuse and Cincinnati have shown improvement but are likely a couple of years away from being real threats. UConn and South Florida aren’t pushovers necessarily, but they haven’t quite kept up with the others in the league. The league itself has moved ahead of traditional powerhouse leagues in the computer rankings because it is much stronger top to bottom than many envisioned. My belief is the top tier programs have forced the bottom tier to step it up or risk embarrassment and humiliation (a very strong motivator).

In cycling, there are five divisions in road racing (Categories 1-5 with 1 being strongest). I’m admittedly not in that strongest group (I raced Category 4 this past season), but I frequently train with some of the category 1-3 guys when improvement is my focus. Time constraints often prevent many of the members on our team from training the 20+ hours/week it requires to race at that top level. If I consistently train with my peer group, however, I’ll merely maintain my existing fitness levels, and I’m less likely to move up to a higher category. Our team (Team Louisville) has been debating various improvement training programs on our team message board the past few days so that’s why I’m including this in today’s post. Some have called for our team to strictly train together with no other teams involved over the winter, and others have suggested that we mix it up with stronger teams in order to improve our overall team. The problem with training just with our team is our team is composed of cyclists of very similar abilities and styles. To me, it’s not an endeavor that is going to improve our team or teach it anything new. That will come with training consistently with stronger riders and teams which brings me back to the value of stiff competition.

If you are looking to improve your business or any aspect of your life, look at businesses or individuals that are currently better than you at whatever it is you’re looking to improve upon. If you merely continue challenging yourself in a manner you are accustomed, you will succeed at developing a plateau not improvement. Sports provide several good examples of this concept in action, and the lessons should not be lost in the business world.

Product Differentiation? Hardly.

By Roger Bauer

It struck me the other day during lunch at a local Moe’s Southwestern Grill that a new phenomenon has swept the restaurant landscape in the form of poor attempts to differentiate from the competition—renaming accepted terms of business with cutesy nicknames. This is readily visible in the faster food sector, and it’s becoming more prevalent as companies struggle to connect with the consumer in manners which create loyalty and/or preference.

Take Moe’s as a primary example. Personally, I believe they have a very good product to offer, but they’ve gone and out “cuted” themselves with ridiculously silly nicknames for their fare which only serve to confuse and frustrate the customer. It’s easy to see them thinking behind the scenes, but it’s a risky attempt at product differentiation. They’re in fierce competition with franchises such as Qdoba, Baja Fresh, Chipotle, LaBamba, Taco Bell, and Tijuana Flats, (plus many others) but those competitors don’t require a translator to order a simple burrito or taco. Try popping into one of those places one day or night to order a “Joey” or an “Alfredo Garcia.” You’ll get looked at like you have three heads (with good reason).

What would possess a franchise to resort to childish nicknames to try to differentiate themselves? It’s probably an executive’s poor excuse of a marketing concept designed to separate from the competition, but that’s not the type of separation that enables your concept to survive long term. It will ultimately separate them all right—the competition will eventually gain as the initial shtick gives way to annoyance and turns consumers off to the point they prefer the competition even with all other factors being relatively equal.

Sure, things look great for Moe’s presently, and the concept seems “fresh” today, but that can change on a dime without warning. Their current growth could be sapped with one false step because there is less room to wiggle when you’re attempting to retrain your customer base to conform to your concept. What happens if the consumer collectively says “I’m no longer in the mood for Moe?” Would being “cute” be overruled by a desire to becoming truly different (i.e. better)?

Don’t get me wrong, there are a lot of positives. Their restaurants are well laid out, the décor is modern, the lighting is appropriate, and the food is tasty not to mention reasonably priced. The physical atmosphere is hip and inviting. There are glaring negatives, too. The staff collectively insisting on yelling “Welcome to Moe’s!” at the top of their lungs as a new customer enters doesn’t make me want to setup shop for very long. I can’t wait to get out so I don’t have to hear that any more than I have to. I’d like a little peace and normalcy with my meal Moe, thanks.

Topping off the frustrating concept Moe’s obviously insists upon cramming down the consumer’s throat is the staff correcting the customer when ordering by the desired ingredients instead of its nickname. You’re not training me Moe, you’re supposed to be providing a quality and quick meal which I am going to ring your register for—don’t correct me, simply make the food, take the money, and let me eat in peace!

Moe’s is not alone in this feeble attempt at differentiation, and they won’t be the last, but the lesson to be learned is to keep customer service just that—customer service. The customer is paying so don’t believe you’re going to train the customer as long as the equation is structured that way. If you begin to pay people to come into your franchise or business, you’re well within your rights to try to train them to do business your way. Stick to doing business as the industry dictates until you develop a better way of doing things. Then, and only then, you will have a true differentiator. Simply renaming a common item or process doesn’t make you different—it makes you contrarian. Don’t confuse the two.

Roger Bauer is Founder and CEO of SMB Consulting, Inc., a Louisville, Kentucky based small business consulting firm specializing in strategic planning, web presence, internet marketing, SEO, technology, and business analysis. To learn more, point your browser to Business Consulting. To contact a small business consultant today, e-mail info@smbconsultinginc.com.

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