I recently read an article discussing how bakery chains were steadily putting small local bakers out of business. It explained how large chains can offer comparable products at lower prices and promote with large marketing budgets. Of course, this scenario isn’t just confined to the bakery sector. Pretty much every retail sector has experienced the same trend – from restaurants to clothing stores to office supply stores.
And yet… some small businesses not only survive, but they thrive in the face of their corporate competition. The bakery article went on to talk about several local bakery shops that have made a name for themselves and have built a loyal (and profitable) following. Of course, here in Portland the bakery shop that comes to mind is Voodoo Donuts, but there are hundreds of other shops here in town that are independent and have built a solid following.
It’s worth looking at why some small businesses thrive while others fade away. It might be tempting to jump first to lower prices as the reason chains succeed while independents fail, but that would be a mistake. Many independents charge more but still build a loyal following. But more importantly, there are chain operations that charge more than their local competitors. Consider Starbucks, where a coffee drink costs anywhere from $2 to $5. Price is generally not the deciding factor.
People choose where they shop based on value, quality, variety, and the experience the business provides. Here are some strategies to think about if you’re a small business – regardless of whether or not you’re competing with a chain, and regardless of whether you offer a product or a service.
Strategy #1: Elevate Value
Actually, value isn’t something you “provide” as much as it is something our customers and clients feel you provide. There is a temptation to lower prices or add more “stuff” as a means of increasing value. But the feeling of value is created by much more than price and quantity.
Just reflect on Starbucks once more. Starbucks gets a steady flow of customers throughout the day. Obviously people find value in going there – even though their coffee isn’t necessarily the best and their prices aren’t the lowest! Clearly, value is much more than price and quantity.
Value is determined by many factors relative to the price paid. Rather than work to lower prices, work to improve quality, variety, and the customer experience. You don’t have to improve all of these factors to add value, just improve the ones you can.
Strategy #2: Exceed Expectations
Expectations are somewhat subjective. High quality at a fast food restaurant is different than high quality at a French restaurant. High quality for a pickup truck is different than high quality for a luxury car. Great service at a fast food restaurant means delivering the food in a matter of minutes. However, if the food at a French restaurant came out a few minutes after ordering, the service would be considered poor. My point is that the market determines the appropriate level of quality it wants.
The key to exceeding expectations therefore, is to determine what your market expects, and then exceed it. Take a fresh look at the quality of your products and the “quality” of your service, and look for ways to enhance each.
Improving quality and exceeding expectations will drive value for your customers.
Strategy #3: Expand Variety
People often find value in having a broad selection to choose from. Too few choices, and it’s not worth the trip. But oddly enough, too many choices becomes overwhelming, causing people to avoid you as well.
Staying with Starbucks as an example, they generally offer only 1-3 brewed coffees, even though they sell dozens of varieties in bags, They do, however, offer a broad selection of beverages that customers can customize just the way they want, along with a broad range of foods to accommodate different tastes and meal times.
Expanding your offerings in the right way and to the proper degree will drive value for your customers.
Strategy #4: Enhance the Experience
The experience a customer has while doing business with you is probably the most impactful and least tangible of all the factors in creating value. A customer’s experience is created by both the physical environment and the manner of service. They each affect how a customer feels about your business.
Physical environment includes things like colors, décor, temperature, furnishings, spatial relations, lighting, and cleanliness. These things all act to create a certain “feeling” about an establishment. A warehouse store has hard floors, high ceilings, harsh lights, Spartan fixtures and cool temperatures to create a feeling of low overhead and high “value”. In contrast, a high-end clothing store has carpeted floors, low ceilings, warm lights, contemporary furniture, and warm temperatures to create a feeling of luxury, quality, and high “value”.
Manner of service includes factors like how a person is dressed, how they communicate, their attitude, their energy, and how they handle problems. Starbucks invests many, many hours and many, many dollars training and developing their staff – not just to make coffee drinks accurately and efficiently, but on how to relate to a wide variety of customers and a wide range of problems. The result? Rarely does anyone leave a Starbucks feeling like they were poorly treated or unappreciated.
It’s often the little things that create the strongest impression with customers. Things like a smile, being acknowledged even if you can’t help them immediately, being called by name, offering a free taste, and being especially helpful. The list is endless and the impact significant.
If, as a small business, you want to successfully compete with chain operations, take a step back from your day-to-day activities – talk to existing customers, talk to your front line staff, visit your competitors for good ideas, and look at your own operation with fresh eyes to see the little things that have escaped you. Yes, it’s a bit of work, but it can be the difference between succeeding and going out of business.