Pulling The Switch: How To Steal New Customers In A No Growth Economy
In a stagnant economy maintaining or growing your business means winning or taking business from your competition. As distasteful as this may sound, think of it this way. If your prospects have been underserved by your competitors during good times, don’t they deserve your superior value more than ever during tough times? Everyone is focusing on getting the most value for their money and now is the time for your prospects to get the best from you. With this in mind, how do you take business away from an entrenched competitor? The most logical way is by understanding and reducing your prospect’s costs of switching over to you.
What are switching costs? Switching costs are the real and imagined costs a buyer believes he or she must pay in order to switch from buying from you. These costs can be before, during or after he makes the change. Furthermore, if a buyer decides to switch from purchasing something to doing it within their firm, his switching costs clearly include devoting internal resources and the lost opportunity of not using these elsewhere.
Here are some examples of real switching costs: retooling, retraining, set up costs and the cost of communicating required changes and any breakage fees.
Here are some examples of imagined switching costs: the cost of likely mistakes, overcoming employee and customer resistance, and rebuilding of trust and faith between you and your buyer.
Use the product lifecycle to exploit switching costs.
Think about the lifecycle of your buyer’s needs. Most buyers of any product or service buy differently depending on where they are in their lifecycle as follows:
When a new product or service is bought for the first time, the buyer worries most that your product or service will fail.
Your response: Provide a triage plan, redundancy and 24x7access to ensure any problem is solved ASAP. Show the buyer you have thought through what could fail and that you are ready to fix it.
During this ramp up phase, buyers worry most that a new supplier won’t be able to keep up with demand or changes.
Your response: Offer extensive examples of your performanc. Define with your buyer all expected changes to the ramp up plan and the responses you have pre-planned to take.
When a buyer is contemplating your company as a steady vendor, she’s going to worry most about her current quality and consistency being maintained.
Your response: Demonstrate how you maintain quality through clear measurements as well as through third party systems and methods such as Six Sigma.
Here a buyer worries most about a new vendor not staying committed or reducing price as production or demand shrinks.
Your response: Agree with your customer on exactly how and when you will ratchet down your production or your service or your pricing, commensurate with demand. Ensure you and your customer have set and agreed on clear benchmarks.
A final reminder on providing value.
Remember that value is always seen in the eye’s of the beholder, specifically your customer your prospect. The fewer politics or policies in your prospect’s business the easier it will be for your buyer to make a switch. Understand what the customer not only values but he or she faces within their company in making a change. In a risk averse era, learning your buyer’s true switching costs is as critical as understanding what they really need and are trying to accomplish.
Want more information or assistance with growing your business in a stagnant economy? Contact Andy Birol directly.