If you’re an entrepreneur, this article is for you.
And if you’re an employee, but want to become an entrepreneur, this article is for you too. This will guide you on what business you should get into.
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| Photo credit: https://pixabay.com |
Though I must admit. There are a few businesses out there that compete on price.
I’m thinking of Walmart.
That’s the mega-giant discount store in the US that guarantees the lowest prices.
My wife loves Walmart. It’s actually the largest publicly held corporation in the world in terms of revenue.
And it’s also the largest employer in the world with two million employees. Yes, they’re incredibly successful, no doubt about it.
My wife loves Walmart. It’s actually the largest publicly held corporation in the world in terms of revenue.
And it’s also the largest employer in the world with two million employees. Yes, they’re incredibly successful, no doubt about it.
But I believe that a business that uses the “lowest price” needs to be the biggest also. Or he gets wiped out by new competitors.
I believe there’s a better alternative.
When the Lowest Price Isn’t Good Enough
This morning, I read about Rack’s, a restaurant that made ribs a popular dish in Manila. I’m a vegetarian, so I wasn’t a fan. But meat-eating friends loved their melt-in-your-mouth ribs to bits. It became the talk of the town. And I saw Rack’s rise.
From one restaurant, it grew to 30 stores all over Manila.
But I didn’t know that it went downhill from there. I learned about it firsthand some years later.
One day, my wife and I were looking for a place to eat—and the only restaurant nearby was Rack’s. I knew they served fish, so we went in. I was shocked. There was a sign that said, “P99 meal—with ribs, rice, and iced tea.” Huh? The dishes at Rack’s were P250+ upwards.
What happened? And the ambiance was gone.
It looked like a canteen of an office. As expected, branches closed down one by one.
From 30 restaurants, only one was left. Before that last restaurant closed its doors forever, someone else bought Rack’s. (The same owners of Shakey’s.) And they removed the low prices.
And brought back the old Rack’s ambiance.
Today, they’re back with 11 stores and doing splendidly well.
Instead of Competing on Price, Compete on Value
What am I saying?
Don’t try to be a Walmart.
It works for Walmart because they’re the biggest thing in the world.
If you offer the lowest price, you may win for awhile. But for how long? If you don’t become the biggest soon, another store will offer even lower prices.
And all the businesses in that sector will suffer because the margins (profits) will be like how my mother sliced cheese when I was a kid. It was so thin, it was transparent. Owners will suffer, because they won’t have money for innovation.
Employees will suffer, because their wages will be very low. And customers will suffer, because of poor value.
Give Them 10 Times the Value!
Here’s what you do.
Instead of lowering your price, give 10 times the value at the same price. Or increase the price, so you can deliver the best.
Obviously, this will need marketing skills. (Offering the cheapest price won’t need marketing skills.)
You need to convince your customers that what they’re paying for is a steal—because you’re giving something so much better than what they’re paying for.
Remember: Keeping your margins high is necessary to function as a business. The profits aren’t for you. The profits are for your employees and for your customers.
How come? First reason: So you can do research and development—and create and innovate better products for them in the future.
Unless you keep innovating, your business deteriorates and dies after a few years. Second reason: So you can pay your employees better—and these employees will serve your customers better too.
Don’t Get Customers; Get Raving Fans!
Customer loyalty is the magic bullet of business growth. But when you have to compete on price, you’ll never gain customer loyalty.
Your customers will always leave you if someone offers the same product at a lower price.
Face it: Low prices attract the wrong kind of customer. In any of my businesses, I don’t want regular customers. I want raving fans. That’s my goal.
I’m not always able to convert every customer into a raving fan, but I’m able to convert enough of them that my businesses have become very successful. In other words, you want your customers to love you and your product.
You want them to be so loyal, they’ll tell the world about you. They’ll talk about you in Facebook. They’ll share stories about you in family reunions. Heck, they’ll even defend you when others criticize you.
Do Your Customers Want to Tattoo Your Brand on Their Chest?
Harley Davidson is one such brand. Many of their customers carry a tattoo on their arm that says, “I love Harley Davidson.” Will customers of Suzuki do that? I seriously doubt it.
And if you want a Harley, you’ll have to wait for six months for your bike to arrive at your doorstep. But if you go to a Honda showroom, you can place your order and ride out with your new bike. So why will Harley customers be willing to wait for six months? Because they’re not customers. They’re raving fans.
Note: Harley isn’t cheap.
But that’s why they have fans.
A 24-Hour Store Selling…Gadgets?
Apple does the same thing. I just came from the States.
And I dropped by the Apple store in New York. It was insane. On that day, there was a snowstorm. I could hardly walk on the sidewalk without being blown away.
From the car, I ran to the store, holding my jacket and my hood for dear life. The wind was biting. And what did I find inside the store?
Five hundred plus people lining up for their gadgets. .
And get this: The store is open 24 hours a day.
You think only Jollibee is open 24 hours?
Think again.
Why is Apple able to charge high prices and create such a demand?
It’s the magic of customer loyalty. It’s the magic of raving fans.
Apple users simple love Apple. That’s what you want to do with your business.
As much as possible, you don’t want to commoditize your business. Or enter into a business that sells commodities. Or nameless products that won’t create customer loyalty.
As much as possible, build a business that spawns raving fans that create more raving fans.
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