Without a doubt, one of the worse things that can happen to any business is to be perceived as a commodity-interchangeable with everyone else who offers similar services. Although most people intellectually understand the importance of avoiding of that trap, more and more find themselves reduced to competing on the only unique variable left-price. Perhaps they think it’s too difficult. Perhaps they think they don’t have anything unique to offer. If that describes you, (or you fear that you may be heading towards becoming a commodity) here are some ideas I think you’ll find helpful.
The biggest reason you want to avoid becoming a commodity is that you’ll never be able to charge a premium price for your services. In fact, as others enter your field (which is a fact of life in business) it’s likely they’ll undercut your reduced price, which leaves you with little alternative but to go still lower. Eventually (and surprisingly quickly) your business is either no longer profitable, or you’re working extremely hard for a minimal return.
The key is to think about a couple of questions.
What else do my clients need? There are things your clients need before they buy your services, as well as afterwards. Can you offer them these services, or perhaps partner with someone who can? The guy that cuts your grass is in a business that can easily become commoditized.” Just hire the guy who’s the cheapest” becomes the buying criteria. And my Mow-Blow & Go Guy could have fallen into that trap. Except he didn’t. Rather, he’s done a great job of determining what else I need.
Pine straw. (It still amazes me that his needs to be replaced twice a year. After all, what the heck happens to it? Does it just vanish? Anyway, I digress.) Twice a year Chris shows up as scheduled to do the lawn except this time, in his truck are bales of pine straw. “It’s that time of year again, and I noticed that your yard was getting a bit bare in spots. I went ahead and got a great price on some straw this year, and wanted to check and see if you’d like me to lay a foundation once I’m done with the yard?”
Proactively thinking about what else might a customer need?
Turns out, all he really invested in was a couple of bales that he perched up in the back of the truck. He’s no fool. He’s not going to make an investment of 50 bales on spec. Plus, what do I know about the price of pine straw? As long as it seems reasonable (and again, what the heck is reasonable for pine straw?), he’s got a sale.
Flash forward to late fall. “I was noticing your gutters and they seem to be rather full of leaves. I think we’re through with the foliage season, so how about I get my ladders and I blow those out before we get a big rain and water starts backing up and coming down through your ceiling?”
See what Chris is doing here?
Not only is he being proactive and adding a service to his core business, but he is (nicely) reminding me about what might occur if the gutters aren’t taken care of in a timely manner.
Periodically, I get someone at the door who wants my lawn business. The pitch is that since they’re in the neighborhood anyway on Tuesdays, they can do my lawn for an incredibly low price. But I shine those offers on. Why, and why do I pay about 60% more for Chris’s service? Because he’s done a great job of answering that question, What else do my clients need?
I live in a big, expensive house. (I know-big deal, why do you care?) Like everyone else, I have home owners insurance. Talk about a commodity business. I just want the best coverage I can get to rebuild the thing at the cheapest price possible. Talk about a commodity business. But that’s not the approach AIG takes, which now has my insurance. All because of the second question:
Do you specialize in people like me?
Call it niche marketing, target marketing or whatever. The more that you can make the claim that you specialize in a particular group, the less price resistance there is. Even for something so commoditized as insurance.
AIG writes policies specifically for people who live in big expensive houses. For example, if one of the bathroom sinks in the master bathroom gets destroyed, not only does AIG fix that, but they’ll pay to fix the other one so that it matches. If you have to move out of your house, they’ll put you up in a hotel that offers accommodations comparable to the style of living you’re accustom to. And so forth and so on.
How much does it cost?
I’m paying about twice what I paid previously with State Farm. Will I actually ever use any of these new benefits? Who knows (and hopefully the answer is “no”).
But I bought this (expensive) policy because AIG focuses on working with people like me. Naturally, your service has to offer specific benefits that are important to the niche market, but the more that you can say, This is for YOU, the less likely you are to be viewed as a commodity.
Two important questions.
Food for thought.
Mark Satterfield, Gentle Rain Marketing — Author , Marketing Consulting Expert, Lead Generation, Business Development, Marketing Strategy, Get More Clients, Increase Revenue — Click here for his Facebook Twitter LinkedIn YouTube