Why do your customers do business with your company?
Is it because you offer a special or unique product or service? Or is it because you provide your customers with a “wow” experience? Hopefully it’s because you deliver irresistible value to your target customer.
For some businesses, however, when you ask them this question, they’ll tell you that their customers buy from them because their company is the only game in town or because they’re one of a very small range of choices within the marketplace. That is, they believe that their customer has no choice, if they need the thing or service their company is selling, but to do business with them.
I hear this response from time to time particularly from companies that provide a specialized product or service with a barrier of entry that will keep competition at low levels without some sort of transformational change in the production and/or distribution of this type of product or service.
While this may describe the competitive landscape TODAY for these businesses, it takes a certain level of arrogance, short-sightedness, and, frankly, laziness on the part of these companies to believe that such a marketplace situation relieves them of the imperative of delivering exceptional value to their target customer every day.
The truth is that most companies that rely on a near monopoly in their marketplace to drive and sustain revenue, while forgetting about the customer value delivery imperative, eventually (in a free market) find themselves loosing market share to a new upstart that is able to win simply by fulfilling an ignored but critical customer need. Need an example? Just look at new entrants in the banking sector like credit unions and internet banking outfits and the revenue they draw away from the traditional retail banks.
Many companies believe that their business is protected over the long term simply because their target customer has no, or limited, choice about who they do business with. How does this belief manifest itself in the products or services these businesses provide? While they may deliver their product or service at threshold levels of quality, etc., they frequently stop there because the ROI calculation doesn’t support doing more (such as delivering exceptional value to the customer). Why, the thinking goes, invest in producing an outstanding product or service and customer experience if it won’t translate into more revenue?
Unfortunately, it isn’t hard to convince yourself that you have tapped out the market, and its revenue potential, when you think you’ve got a near stranglehold on the marketplace.
However, the problem with this entire line of thinking is that it’s limited on multiple levels: about the scope and reach of the marketplace, the behavior of customers and the choices they have/make, and the way of approaching ROI.
As I mentioned earlier, never underestimate your marketplace and the competition. Innovation and non-traditional approaches to doing business are springing up all the time thanks to advances in technology. Your proprietary production method that is giving you a market leadership position today could become your Achilles heel tomorrow. Never assume that your current position on top of the marketplace will be sustained. If a small marketplace with little competition is the sole basis for your competitive advantage, what will you do tomorrow if/when future entrants neutralize this advantage?
As for the reach of today’s marketplace, who knows whether the boundaries will be the same tomorrow. Today your play might be local but tomorrow it may be regional, national, or even global – the internet and the connectivity it brings has made this a real possibility. Sure you may be the only fish in your local market today but what if expanding market boundaries tomorrow bring in more competitors? How will you achieve sustainable success without your monopoly status to rely on?
What if your company has been regularly competing against a small number of competitors that customers tend to circulate through to offset the business risk of using just one provider? What’s to say that this customer behavior, and the choices they make about who they do business with, couldn’t be changed with the right incentive such as the delivery of exceptional value? Betting your future success on a strategy of passively depending on past customer behavior is a risky proposition.
Is direct (and immediate) revenue generation the only factor your company uses to determine return on investment? What about customer loyalty and goodwill, word of mouth endorsements and recommendations, customer relationships, and future earning potential? These are very real but more indirect factors that could/should play into your ROI calculation. However, if you only take the limited view that ROI is based on revenue generation then, in a monopoly situation, striving to go above and beyond for your customers might not be seen as a necessary investment.
The reality is that, even if your customer is tied to you now, the time will come (for some of the reasons outlined above) when they get their opportunity to make a choice. And, if you are simply using your short-term situation and position to ignore your responsibility to also deliver irresistible customer value, when the time for choice comes, it’s almost guaranteed that your customer will choose change. Moreover, while you have a stranglehold on that unhappy customer, remember that they will be telling everyone they know (including other and prospective customers) about their experience – destroying the future earning potential of your business.
So, here’s an alternate approach for you to think about.
The keys to sustainable success for companies, no matter how competitive their marketplace is, include the following:
(1) Never tell yourself the lie that your customer has no choice about who to do business with;
(2) Always compete on the delivery of exceptional value in the eyes of your customer (even if there isn’t significant competition in your marketplace today) – your goal is to ensure that every customer is happy that they have no (apparent) choice of who to do business with; and
(3) Always keep your finger on the pulse of the marketplace, the competitive landscape, and your customers and be ready to change as required.
Your reward for taking this approach is that when your customer has the opportunity to make a choice about who they do business with, they (and, with a little luck, their friends and colleagues) will happily choose you and your company!