When we talk about property and real estate the accepted mantra of the three most important requirements are location, location, location. I believe that in business the mantra is differentiation, differentiation, differentiation.
The fact is that if two businesses sell exactly the same thing in exactly the same way the only way they can compete for the customer’s business is on price.
The problem with that is whoever wins, loses. Constantly reducing prices is ultimately a game that no one can win. A race to the bottom is not a race that you will want to win.
So one of the great conundrums of business is how we can successfully differentiate ourselves from our competition in such a way that will cause the customer to choose us over the competitors at a price point that allows us a decent return.
We are seeing this game being played out right now in the UK with supermarkets. The recession has promoted some of the lesser players to prominence because they could achieve a lower price point. The biggest players are now slashing their prices to compete. They can do this, to some extent thanks in part to their enormous buying power, but there is an understanding that this cannot continue and we can expect to see other tactics come into play to differentiate one from another over the next few weeks.
I saw some statistics that showed that one chain was less affected than the others because it had been judged to have stuck to its promise of the lowest prices everyday, whereas perhaps its competitors had not been so kindly judged against their promises.
I spoke with a business yesterday whose business model is totally predicated on customer service and the business owner said that when a client has a problem “all thoughts of profit or cost recovery goes out the window and we do whatever is needed to get that customer’s problem fixed”.
It strikes me that whatever formula we choose to differentiate ourselves by, whatever area we choose for our business to be pre-eminent in, it is a position that is constantly being eroded, that constantly needs to be defended and that constantly needs to be demonstrated.
This can only be done by bold, single-minded action and focus on our point of differentiation. We have to absolutely know our point or points of differentiation and boldly promote it.