I recently attended an entrepreneurial roundtable where aspiring entrepreneurs meet and discuss new business ideas with experienced business founders. It is a great example of how collaboration can spur the development and execution of a new business.
When one entrepreneur was asked how he differentiated from his competitors, of which there were only a few but strong examples, he mentioned price -- because they were new and had little overhead, they could offer services at a better price.
The problem with this strategy is that as soon as your competition sees you as a threat, all they have to do is lower their cost long enough to take away this differentiation.
As the discussion continued, the founder admitted that they were not offering one service that the competition did. He went on to say that they did not offer it because it was expensive and could be risky for customers.
This was a huge revelation, because by not offering a particular service, they had essentially created a business that was better than the competition. This seemed counterintuitive -- to offer less rather than more than the competition -- but in this case, it turned out to be a great way to differentiate.
We encouraged them to find alternatives to this service and, if necessary, create a viable service that could replace it. Also, we emphasized creating content that would educate customers, not smearing your competition -- which is never a good idea -- but rather about the alternatives and benefits of their own service.
Often, inexperienced entrepreneurs rush to undercut their competition on price when there actually exists an unseen or unrealized benefit that can lead to success and sustainability. Consider one of these areas in which your new business idea could compete.
Is there a gap in or lack of quality in the existing offerings? How can you meaningfully improve on this service or product quality? More important, are customers even want -- and are they willing to pay -- for a higher quality product or service?
Can you offer better or more convenient service? This goes beyond just adding people to answer a phone, but rather how can you really add a benefit to customers through creating a better experience overall?
Is there an opportunity in the industry for developing a new product, service or process? Have you found a way to deliver a product or service faster, better or cheaper? In some cases, this may actually mean creating a proprietary innovation.
Going further, are there industry-wide or legislative changes that could augment the industry and ultimately add value to consumers? Are you willing to put the work into this change?
Is there a particular unserved industry segment that is not currently being served by the existing offerings? If so, how can you connect with them on a real, meaningful and even emotional level?
In the end, success rarely comes from price battles for new entrants. Instead, look closely at your industry and target market, identify their pain points and decide how you can add value.
If you can do that, customer will come regardless of price.