Beating the competition
What are you doing to differentiate your business?
By Fred Koury
August 2007
If your company invented the credit
card, would you be looking to share it
with some of your competitors?
Visa was.
Most companies would see it as too good to give up, and the first-to-market advantage
would put them in a clear leadership role as
the competition played catch-up. But what
then? They’d fight to stay in
front, margins would shrink
as everyone jumped into the
business, and then they
would have a commodity on
their hands. It might take
years or even a decade or
two, but if it’s a good idea, it’s
going to attract imitators.
A branch manager at Bank
of America invented the
credit card as a way of
streamlining bill processing at the bank.
The BankAmericard program was an
instant hit, and Bank of America began
licensing it to other banks.
Dee Hock, one of the leaders of a group of
BankAmericard licensee banks, proposed
that the banks form an association — a joint
venture that would allow members to enjoy
the benefits of a centralized payments system while competing fairly for their own
interests. Hock became the new group’s
first president. In 1970, Bank of America
transferred control and ownership of
BankAmericard to the newly incorporated National BankAmericard Inc., which
changed its name to Visa in 1976.
Instead of fighting it out with a bunch of
redundant systems, Hock’s organization
allowed the banks to keep their own brands
within an efficient, centralized system. The
end result was that all of them benefited
from the credit card revolution.
Hock’s example doesn’t mean you have to
run out and share your latest invention with
the competition, but it does show that you
have to understand your market. You have
to find a way to maximize the value of your
products and services, and it starts with differentiation. You have to make your product
unique from that of your competitors.
When you do that, it gives you a couple of
advantages. First, there’s the obvious value-added that everyone always talks about.
You can give them something others can’t,
making your product more desirable.
Second, it gives you a means to be able to
avoid the squeeze of customers who are looking for exclusivity.
A company might be very interested in
doing business with you because it sees
how your product can benefit it, but at the
same time, it doesn’t want you doing business with its competitors. It wants exclusivity with you, but it’s going to cost you
business with someone else.
That’s where the differentiation comes in. By creating differentiated product lines, services, programs or whatever it
takes, you can offer exclusivity
in that category to one business and exclusivity in another
category to someone else — in
addition to perhaps a “generic”
product to everyone else.
People want products that
offer them unique value, so
you need to solve their problems by creating a supply for their demand. By differentiating yourself and your products, you
will not only create happier customers,
you can also command higher margins
because you have something unique that
the competition doesn’t.
Listen to your customers for clues on
what they need. What are they asking for?
What are they complaining about? Don’t
make the mistake of settling for the status
quo because that makes you just like
everyone else.
Every business can find a way to differentiate itself. Sometimes, it’s as simple as
packaging. For instance, soda companies
now offer 6-ounce cans, 12-ounce cans, 16-ounce bottles, 20-ounce bottles and 2-liter
bottles. Candy bar companies are doing the
same thing. Their sweets now come in bite,
miniature, standard and giant sizes.
Some food companies listened to their
customers’ needs and are now private-labeling for supermarkets rather than trying to fight their way onto the shelves
using their own brand, making them more
of a packaging business — and a business
that can provide products to multiple
supermarkets using their brands, creating
a different kind of exclusivity.
The point is, you have to find a way to be
different, and the best way to do that is to listen to your customers. When you do that,
you’ll find ways to make your company better than the competition.
FRED KOURY is president and CEO of Smart Business Network Inc. Reach him with
your comments at (800) 988-4726 or fkoury@sbnonline.com.
