Choose Your Competitors

It may sound strange, but you can, in fact, choose your competitors. Actually, you SHOULD be choosing your competitors. Competition is fierce so it is up to you to shape your own competitive landscape so that the choice is clear for your customer. Sound a bit shady? It shouldn’t — there are many successful models. Two of the most clear and well-known examples? Coke vs. Pepsi and Mac vs. PC.

Coke and Pepsi have been battling it out for decades now, and I guarantee you they wouldn’t have it any other way. There are hundreds of sodas out there — the market is flooded, yet two companies command a vast majority of the market. Forget store brands or small companies like Jones that are just a blip on the soda radar. By choosing to go head-to-head, Coke and Pepsi have relegated everyone else to 2nd tier status. The benefits? Because each company only has to focus resources on one serious competitor, they know EVERYTHING about each other. The battle is fairly cut and dried because the opposing force is right in front of you. No guerrilla attacks or multi-front wars to worry about. Sure, there may be a sneak attack on occasion, but when you’re fighting an enemy that is well understood and evenly matched, the wounds won’t be too serious.

Apple has taken a different approach to defining and choosing its competitors. When you walk into a computer store you may find 6 or 7 major brands to choose from. In differentiating itself from competitors, Apple could try to demonstrate how they’re better than Sony or Dell and be making essentially the same argument they’re making today. Instead, they’ve chosen an Us vs. Them approach. Their television ad campaign for computers is based on this strategy. They’ve portrayed the consumer’s options as choosing between a Mac or everyone else. In this way they’ve collapsed their entire universe of competitors down to one: PC. So now, rather than trying to battle it out with the different brands, one by one, they’ve told the consumer that the choice is really between the fun, dynamic and unique Mac or one of those other guys who are really all the same. In this way they’ve accomplished 2 objectives: dismissing a multi-front hardware war in favor of a single front operating system war and, at the same time, reinforcing their image as a creative lifestyle choice.

I Heart Local Businesses, Part 3

Peregrine at Eastern Market

First, check out Part 1 for some background and Part 2 just for the entertaining reading.

For our final installment on how local businesses outcompete national chains, we’re following up the game theory discussion with something a little more fun: giving your customer more for free. Harkening back to the point about flexibility in Part 2, unless a national chain has run the numbers and confirmed an initiative will meet or exceed the ROI hurdle rate … I don’t think I even need to finish that sentence for a local business owner to see where your advantage lies. You’re you, and you don’t need a finance team to tell you what sells. You see something that makes customers happy, you do it. Especially when that something makes the customer feel like they’re getting more for their money (making your product a better value) without you making any additional investment, then everybody’s happy. Take Peregrine Espresso as a concrete example. This Eastern Market business gets my dime over the nearby chain store every time. Why? Because they take the time to draw a picture in my drink. Seriously.

I Heart Local Businesses, Part 2

(If you didn’t already read Part 1, go check it out. I’ll wait and you’ll need the background.)
With consumers jittery and $50,000 home improvement projects not as common as they were five years ago, how does the local business out compete the “rock steady” reliable national chain? When a buyer is worried about squeezing every last bit out of her dollar — and then some — the likely move will be to go with the national chain: a known quantity that will definitely be around in 2 months or in 10 years when the pipes leak and ruin your drywall. This way our buyer controls the maximum number of variables, leaving the least amount of uncertainty possible. But has she traded away too much variability?

What our local business has going for it, in a very big way, is FLEXIBILITY. And flexibility is an inexpensive (or even free) way to give that buyer the feeling she is getting the most for her money. Maybe our buyer feels good about the national chain’s guarantee, but she wants one appliance different from that chain’s branded line. The national chain cannot deviate from protocol. The local business doesn’t have the same constraint. The national chain may have done thousands of projects like hers, but they also have hundreds of work crews and high turnover. Her local business can guarantee that everyone on her job has done that specific work many times over. And since she can speak to the owner, that is a guarantee that carries weight. Big companies must depend on operational consistency to keep their ship on course. Deviating from protocol is not rewarded and is often punished. Operational consistency is also important for a small, local business, but they’re also small enough to provide a much wider range of flexibility within that operational framework. It makes the customer happier and the small business owner can reward her staff for it.

In game theory, this comes down to a very important difference between

I Heart Local Businesses, Part 1

Bad economic cycles can be scary times for small businesses. Consumers are spending less, which reverberates throughout the supply chain, especially one that isn’t maximized. When consumers can be persuaded to part with their money, it may only be for very steep discounts (which carries its own problems – more on that in another post) or for something they feel comfortable purchasing either because it is a safe purchase or there is an attractive consumer surplus — i.e., the price paid is less than the value the consumer has for the product. Lab Notes is undertaking a two-part look at how small, local businesses can use these factors to out compete large, national chains during difficult times.

First, the scenario. Times are tough and you’re a small business fiercely competing for a rapidly declining number of consumer dollars. What do you do? For the sake of argument, let’s dismiss discounting because we don’t believe it is appropriate or sustainable. That leaves you appealing to safety and/or consumer surplus. Let’s say a customer is interviewing contractors for a complete master bathroom renovation that will cost $50,000. One estimate is from a national chain that has been around for over 100 years and the other is from a local business that has been around since 1998.

Here are the key factors for evaluating the national chain:

Is Tradition Stale?

Everyone tends to reflect on tradition this time of year but when it comes to thinking about tradition in a business sense, the first industry that comes to mind for me are newspapers. For generations, they have been (and continue to be, according to statistics) consumers’ most credible source for news and information. They survived television coming into everyone’s home, but are struggling to find successful business models for the internet age. The digital economy is not very kind to companies more interested in preserving an old business model than those willing to completely rethink how to approach a market (in this instance, online-only newspapers, blogs, vlogs, etc.) But does this mean a more traditional business — or more importantly, YOUR more traditional business — is destined for slow decline while consumers look to new economy companies to meet their needs?

The ’71 Mustang of Grooming

I love good design. Take me to the Met, and I’ll go check out the vacuum cleaners and Bauhaus accent chairs. My favorite permanent exhibit at the Smithsonian? First Ladies’ dresses. However, I’m quite demanding because I believe in the practicality of form leading to function, but I also want it to bring function to life. When I was growing up, we still had my mom’s car from high school — a blue, 1971 Mustang. I fantasize about that car to this day. From the inside out, it was an amazing machine in a gorgeous package that would still turn heads today. It was positively cinematic, embodying everything that I still associate with all the cool images of the late 60′s and early 70′s.

When I went to meet my husband at Michael Craig, I felt like I was sliding into that Mustang once again