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If you could answer one question in these tough times...

I was on an afternoon hike today with Ron Worth, president of Flashcut CNC, a company that makes electronic controls for manufacturing equipment. I asked Ron this question: "In these tough economic times, what is one thing you want to know that you don't know?"

Without hesitation, Ron answered, "How to motivate people to buy for a reason other than price."

Amen, Ron. Thank you for not saying, "When will the Dow hit 10,000 again?" or "Will Obama's stimulus package work?" or "How much cost do I need to cut out of my business to survive?" Ron hit on a key issue that drives my thinking about dealing with this economic mess: The surest route out of trouble for your business is for your customers to buy from you, not for you to cut costs or wait for macroeconomic trends to turn around.

So, what's the answer to Ron's question?

Someone will give you a disproportionate share of their business if they believe that you are different, in a very meaningful way, from other options. So, what are the ways you can differentiate yourself in this crazy economy?

The oldest (and most tired) trick in the book for differentiating your company is advertising and other marketing promotional efforts. Don't rely on these too heavily.

Why? Want some proof? How many ads can you remember from the Super Bowl, just a few weeks ago, and, more importantly, how many of those ads helped you create compelling, motivating, differentiating beliefs of the companies behind the ads? And exactly how many of them influenced your purchasing decisions?

The next worst way to differentiate yourself is with price. Sure, it drives sales, but the only thing sustainable about a price-oriented message is, "Hey, we're cheap, and we might always be cheap!" If that's the story you want to tell, then, hey, go ahead and tell it. But my guess is that most of you won't want to tell that story.

What's the next best (worst) way to differentiate? Here it is: "Our product is the best." "Our product is new and improved." "Nobody offers the service we do." Yawn. Guess what? In today's "land of plenty," your customers believe that whatever you sell can be purchased elsewhere. (If you think you truly have a unique product, ask yourself this question: Will it be unique two years from now?)

Here's the answer to Ron's question: The best way to differentiate your company in tough times is not by advertising, pricing, product or service. It is by creating strong, sustainable, meaningful "We" relationships with your customers.

Relationships are your best differentiators at all times, but they especially are in this marketplace.

Why?

Here's a hint, in the form of a question: Who do your customers care about more, you or themselves?

I'll bet none of you answered, "My customers care more about me than themselves," unless you are the executive director of the American Cancer Society. Your customers care much more about themselves than they care about you!

So, if your customers care more about themselves than they care about you, what do you want them thinking about, you or their connection to you?

It's almost a "duh" that most people never really explore. If you want your customers to think that you are different, don't focus on what makes you unique, focus on what makes your relationship to the customer unique.

I began writing We: The Ideal Customer Relationship three and a half years ago, and I've been completely immersed in this concept of relationship-as-differentiator ever since. I really believe in it, and I hope you will too. Doing so, however, requires you to completely turn on its head your lifelong-perspectives on marketing and sales. Your marketing and sales messages shouldn't be about you, they should be about your customer's relationship with you.

Let's look at the points I made above in a "Differentiation Ladder," illustrating successively better ways to differentiate your company:

Differentiation Ladder Graphic
Download The Differentiation Ladder (Adobe PDF)

Now, I ask you to notice something very important: As you go up this ladder, your ability to differentiate your company in your customer's mind increases, and the return on investment also increases.

Think about this...

Advertising and other marketing communications are really expensive and really inefficient. They don't work most of the time! (Example: You send out 1,000 brochures and get two phone calls.)

Price promotions are really expensive, and often have a terrible return on investment. Yes, you generate sales, but often give up most of your margin.

Product and service enhancements are really expensive. Yes, they are necessary, but the investments can be large, and the chances of success are often very low. Think of all of the failed new products, or product/service enhancements that are barely noticed by customers.

Relationship-building costs money, but not nearly as much as you might think. Does it really cost any more for you to have a relationship-building encounter with a customer than it does to have a relationship-eroding transaction with that same customer? (For more on encounters and transactions, see Chapter 2 in We: The Ideal Customer Relationship or my free ebook, Encounters, available at www.yastrow.com)

And, more importantly, the return on relationship-building efforts is more certain and more lucrative than the less-effective differentiation efforts lower on the differentiation ladder.

So, Ron and everyone else, if you want to motivate people to buy in this economic meltdown, focus on your relationship with them, not your promotional messages, price promotions or product features. In these times, your customers are very concerned about themselves, so why not focus your messages on something that includes them, their relationship with you?

Take Notice

In today's frenzied marketplace, many companies are desperately trying new ways to get customers to buy. As you notice these efforts, rank their effectiveness by the Differentiation Ladder. Do any make it to the top? As people try to sell to you, are you more motivated by differentiation efforts higher up the ladder?

How do you compare?

How is your company trying to differentiate itself in this economic upheaval? Are you trapped at the bottom of the ladder, trying to advertise your way out of this, cutting prices in an attempt to cut through the clutter of all of the other adverisers? Or, are you focusing on customer-relationship building? Assess everything your company is doing to deal with this economic disruption, by seeing where your actions fall on The Differentiation Ladder. Be honest with yourselves. Be self-aware.

Try this

After assessing where your actions fall on the differentiation ladder, have a tough, intense, soul-searching discussion about shifting your resources and attention higher up the differentiation ladder. Here's an example: Let's say you're planning to print a new brochure and mail it to 5,000 prospective and past customers. What if you took the money you've budgeted for this brochure mailing and focused it on relationship-building efforts with 100 customers? Now, the numbers in my example may not exactly apply to you, so feel free to change them, but the point holds.

Or, look at the price decreases you've offered recently. Could that money have been spent-- and margins protected-- by focusing on relationship-building encounters with customers? Remember, the effect of a price decrease isn't just today; it's often hard to get prices back up to previous levels.

Everyone is chasing fewer dollars these days, as customers cut back on spending, Getting your share of those limited dollars depends on how well you get customers to think "I can't get it anywhere else" when they think of you. The higher up The Differentiation Ladder the reasons for "I can't get it anywhere else" are, the higher your return on investment.

When it comes to The Differentiation Ladder-- Aim High!

Steve Yastrow
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steve@yastrow.com
P 847 686 0400

Steve Yastrow

When Steve Yastrow writes, I pay close attention. - Tom Peters

Need some help climbing the Differentiation Ladder?

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We: The Ideal Customer Relationship

Buy Steve's new book, We: The Ideal Customer Relationship

In We, you will learn:
How to create relationship-building encounters, instead of relationship-eroding transactions
How to connect multiple customer encounters into an ongoing conversation that creates a strong We relationship
The power of We among many-- a relationship between many people in your organization and your customers

We is both a manifesto and a how-to guide that will change the way you interact with customers ... and change the way your customers think about you. 

More praise for We

“When Steve Yastrow Writes, I pay close attention. He is at once a wonderful storyteller, a sophisticated purveyor of ideas, and an effective change agent. I think We is a superb book-and I am mesmerized in particular by Yastrow’s critical differentiation of ‘experience’ and ‘engagement’. Bravo!”
- Tom Peters

"This is a fundamental shift in thinking that offers up a what's-next-beyond experience marketing."
-Tim Sanders, former Chief Solutions Officer at Yahoo and author of Love Is The Killer App: How To Win Business and Influence Friends
 
"Steve Yastrow is at the forefront of the next evolution in marketing"
-Mike Depatie, CEO, Kimpton Hotels & Restaurants

Get More Steve

The Differentiation Ladder Blog Post

Turning Customer Segmentation on its Head

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Don't ignore the other steps in the ladder. Read Steve's first book, Brand Harmony, to understand how to make each touchpoint your customers have with your company blend into a harmonious whole...

"I had to buy two copies. The first one is so dog-eared and underlined I couldn't read it any longer." - Seth Godin

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Steve Yastrow
Steve Yastrow
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