- July 8, 2014
- Posted by: email@example.com
- Category: Marketing and Distribution
If your product or service was better, faster and cheaper than your competition, would that be a good thing? From a marketing standpoint, the answer is no.
Most mid-market company executives have enough understanding of strategic marketing to avoid this mistake at the planning phase, but I see it happening often – more than you’d expect. And it happens at the execution phase.
- The foundation of the brand is built around the quality of the service
- The marketing team promotes how the service gets results faster than the competition for further differentiation
- The sales team, when arriving at the end of the sales process and asking for the order, begins dropping the price to beat the competition once the prospect throws up his final objections
And this creates a long-term perception problem.
To illustrate, try walking into the Mercedes dealer and asking the sales rep to drop the price of the E Class to match the price of the top-of-the-line Hyundai Genesis. To the non-discriminating buyer, they’re both very similar cars. Both have 4 doors, are roughly the same size with similar features and performance, but the Mercedes will cost $10,000 to $20,000 more.
You may be laughing at this comparison, and it is a bit absurd, because few people compare these two car brands. That’s why I chose it though, to drive home my point:
- The Mercedes dealer isn’t going to drop the price dramatically to get the sale. (And you’re going to be laughed out of the showroom.)
I’m not telling you that discounting is a bad practice. (And it’s surely not if your brand is positioned on price, like Walmart.) It can be a bad practice if it’s confusing your market; the confusion happens when you start out telling your market that you’re better and faster, and then later tell them that you’re the same price as everyone else, or even cheaper.
Let’s change gears for a moment and focus on the perception of your brand in the marketplace. Does your team understand the real reasons why your customers decide to purchase your product or service?
It seems like an innocuous question, but the reality is that many stakeholders of mid-market companies cannot answer this correctly. In her book, Creating Competitive Advantage, author Jaynie Smith says that in researching small and mid-market companies, she found only two out of 1,000 CEOs could clearly identify their company’s extraordinary advantages.
The majority of them (approximately 70%) thought that their great customer service was the trigger that caused their customers to choose their company. Customer service is part of the brand experience and can play an important role in retention and revenue growth, but it’s actually quite rare for mid-market companies, especially B2B companies, to position their brand entirely around their service, making it their key differentiator that causes their market to buy from them.
From my experience, far fewer than 70% of the mid-market companies have positioned their brand around extraordinary service. (A few brands that do position themselves around service are Zappos, Rackspace and Nordstrom.)
Buckets, or Ladders in the Mind
Science has proven that people seek to simplify whenever possible. When presented with a new product or service, our minds will work as quickly as possible to place it in a “bucket” (or on a ladder, as Trout and Ries mention in the book Positioning) in their mind. Once you’re in a bucket, it’s very difficult to change.
If you’re now thinking about your brand’s perception, and your key differentiation, try to stand in your customer’s shoes for a moment. Take an objective look at your brand and seek to simplify it, just like your market does, and ask yourself the following:
- Is it truly better than the competition?
- Is it faster than the competition?
- Is it cheaper than the competition?
For many mid-market companies, there’s no clear-cut answer. If you’re a B2B company with multiple products or services in multiple markets, you might need to consider this for each market.
And the reality is that many customers may not recall the original reason why they bought from you. If you’re providing value at a fair price, many will continue their business with you because of the pain in switching to a new vendor.
But to really grow your company, to influence your market, you need to create a compelling distinction between your brand and your competition. A distinction that’s accepted by the marketplace.
What’s Going on in the Mind of Your Customer
If you don’t already know how your market perceives your brand, it’s a good idea to find out. You’re striving to fall into one of these 5 buckets:
- Better + Faster
- Faster + Cheaper
Buckets #4 and #5 aren’t as strong as the first three. And as I mentioned above, never try to be all three.
And if you realize that your offering isn’t clearly any of these, take solace that others have come to the same conclusion. There’s a significant amount of perception involved in creating mindshare in the market. Hyundai had significant problems with quality in the 1990s, but then they offered a 10-year warranty (without changing their cars) and began to change the minds of their market. Over the years, they improved their product development to match the perception they were creating, moving them from the “cheap but low quality” bucket to the “value & fun” bucket.
You can do the same, if you’ve decided on the right strategy. For more guidance, check out this 4-part series, or give me a call.