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Why the client should choose You!? 12 vectors of competitiveness

Why will the client work with Your company? Will he order it from You? Will it pay you? If You are not a monopolist, the answers to these questions are the most important answers for Your business. And it is these answers that determine the competitiveness of Your business – the ability of your business to attract and retain customers. The same questions can be asked about Your product or service: why would a customer choose your product from a variety of options, buy or order your service?

The most unprofitable answer and alternatives

In fact, there are only two answers: because it is cheaper for You or because It is better for you. The first response is to harm Yourself. Although this is the most common response (or attempted response), it is the worst answer for Your business. Since business is done for profit, and profit is the difference between price and cost, selling at a lower price than was possible reduces profit. Is it possible to use this answer to create and develop a successful business and reach certain heights? Yes, of course! Walmart is a Prime example. But, Walmart is one, and those who tried to follow in its footsteps – tens or hundreds of thousands… So, let’s look at the second option of the answer: “because Your company or your product/service is better.” There is a natural clarifying question: what is better? Is it really better? Or is it just different? Is it really so much better that the customer is willing to pay extra for it? If this response option is selected, it is the response level that determines the business’s ability to attract more customers. I will try in this article to structure the answer to the question “what exactly can be better?”, and provide tools so that You can analyze your company’s business, and take several serious steps to ensure and develop the competitiveness of your business and product or service.

In fact, there are at least TWELVE answers. But in order to understand them, we will “get into the head” of the client making the decision. Regardless of whether the client is an individual or a legal entity, the decision is made by a specific person. This person has a “scale” in his head, with which he makes a decision. On one side of the scale is the price, that is, what the customer pays, or what they spend, what they lose, what they give, what they do to cooperate with Your company, to buy/consume/use Your product. We are talking about both the purchase price and the price of ownership or use/consumption. Moreover, this price does not always consist in the amount of money. Moreover, the customer must always pay for the purchase and use of not only money. Price-money, that is, what is written on the price tag or in the price list or in the commercial offer-this is only the surface part of the”price iceberg”.

In addition to the amount that the customer will pay You, it may require additional costs for delivery, storage, supplies, electricity, installation, training, etc., depending on what product or service is in question. For example, if it is a mobile phone-the cost of maintenance, voice and digital traffic, if the car-the cost of registration and insurance, gasoline, repairs, tires, Parking, fines. If it is a corporate training or seminar-the cost of the venue and conference service, travel and accommodation (sometimes), the salary of participants for the duration of the event. If the loan – the cost of paperwork and insurance. If the equipment – the cost of delivery, installation, staff training, maintenance, warranty and post-warranty repairs, consumables, electricity. If the furniture – the cost of delivery and Assembly (if this is not included in the price). And so on… it is Important to know the level and items of additional costs for the customer in the case of buying and using Your product, as well as when buying and using competitive products.

But the client still spends more than just money. He also wastes his time. For example, to drive to Your store or company. Or to call Your company. To communicate with You. Get the necessary information about the company and the product/service. Coordinate the request with You. Coordinate the contract with the management and relevant services. Completed form. Choose. To execute the documents. Pick up the product. To obtain Your service. Deliver and mount. Learn how to use this product, get used to it (that is, to reach the level of habitual comfortable use). Train your sales people who will sell it. And so on… For this (and all other) component of the price, you also need to know the cost level of the customer when buying and using Your product/service and when purchasing competitive or even substitute products and services.

In addition to time, the customer must spend some effort on purchasing and using or consuming Your product/service. There are three types of efforts: physical (call, drive, stand in line, deliver, collect…), intellectual (understand our offer, calculate the economic effect, choose from alternatives, issue documents, learn…), emotional (spend “nerves” to communicate with the seller, make a decision, convince the management, colleagues, the one who will use, the spouse, learn and get used to, refuse the current or other supplier, achieve warranty service and repair, replace if necessary…).

Also, in order to purchase and use a product or service, the client often takes some risks. For example, functional risks – will the customer really get what You promised, will the product work, will the service meet your expectations? Physical or health risks – I will be poisoned/not poisoned, useful/harmful, will there be any injuries? Legal risks – will everything be in order with the documents, will there be no complaints from the inspection bodies, management, or the end customer? Financial or economic risks – will I lose my money, will it be profitable, will I earn what I expect? Social or reputational risks – what will others, higher management, colleagues, clients, the press, and the public say? Emotional risks-will you like it or not?

And one more component of the price should be taken into account – the alternative cost. The cost, the value of the alternative that the customer refuses by choosing our option. Perhaps, in order to cooperate with You, the client needs to give up the positive emotions of cooperation with another client, or the kickback received there, or the exclusive terms of cooperation… If they spend this amount of money on Your product or service, they will not be able to spend this amount on something else that they want to buy. That is, to spend on You, he must give up something (other). If he spends his time on your service, or meeting with You, he will not be able to do anything else at this time. If it places Your product on a shelf, it will not be able to place another product on this shelf. And so on, with limited resources of time, money or space, spending these resources on You, it refuses to alternative options for spending these resources… But since this parameter does not depend on us, but on the client, its context, we will not consider it now. Let’s just remember that it is also present.

The listed non-monetary components of the price are often more important and valuable for the client than money. Regardless of whether the client spends their own money or someone else’s money, that is, faceless figures.

Given the fact that the price consists of the components listed above, and the answer “the customer will buy from me/this product, because I/this product has a lower price” can also be decomposed into these components. If we say that the product is cheaper, it can be cheaper not only for the monetary component of the price. It may be cheaper to buy, it may have lower associated costs and cost of ownership or operating costs, it may take less time to acquire and use it, it may take less effort, or it may have lower risks. Thus, You can already be better than the competitor, that is, more competitive in 5 vectors:

1. Cheaper at the price (monetary part);

2. Cheaper for the associated/additional costs, the cost of owning and operating;

3. Require less time to purchase and use / consume;

4. Require less effort (physical and / or intellectual and / or emotional);

5. To assume less risk (the certainty factor and the trust factor);

Ideally, the first vector should be combined with all the others, or at least part of them. That is, to be cheaper not only for the monetary component of the price. At the same time, the smaller the amount of money required for a purchase is in the total amount of the buyer’s income or expenses, the more important the 2-4 vectors of competitiveness are for him. If the purchase/transaction amount is less than 5% of the total income/expenses of the buyer, and in the case of working with a legal entity, 1%, choose vectors # 2,3,4,5 from the listed competitiveness vectors.

More profitable answers: what is the customer willing to overpay for?

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