“People don’t buy what you do, they buy why you do it.” – Simon Sinek.
As a supplier, service provider or subcontractor, have you ever felt tired of being stuck in a price war with your competitors and getting caught up in The Race to the Bottom?
What is the Race to the Bottom?
The Cambridge dictionary defines The Race to the Bottom as: a situation in which companies compete with each other to reduce costs by paying the lowest wages or giving workers the worst conditions.
Why reduce costs? In order to post the lowest price. But offering the lowest price comes with costs of its own.
Common price-cutting tactics are lowering quality, reducing profits, reducing safety standards and paying lower wages. These end up costing the customer and the business owner – nobody wins. And looking a bit deeper, research shows us that the Race to the Bottom cripples innovation and adversely affects quality.
So in reality, the question owners ask shouldn’t be “How can I lower my price?”
The questions to ask are “Should I engage in a price war?” “What’s the alternative?” and “How do I get there?”
Price Wars: Should I Engage?
Well, the first question is easy to answer.
Don’t take our word for it – The Harvard Business Review produced a flowchart which helps determine whether you should enter a price war. The answer is a clear ‘no’ unless you are a global powerhouse organisation that is able to roll with heavy losses.
Price Wars: What is the Alternative?
The next two questions: “What is the alternative?” and “How do I get there?” are harder to answer, but much more rewarding.
There was a time when Visible was caught up in a race to the bottom, until we took a step back and remembered what problems we were here to solve as a business for our customers.
We have found that taking the following 7 steps to provide increased value, will differentiate you from your competition, counteracting the struggles of a Race to the Bottom where the winners are actually losers.
The seven steps we followed are:
- Purpose/Why/Your Ikigai
Understand what problems you are here to solve for your customers by clearly defining your purpose as an organisation. Here’s a clue: your purpose is not: “To make money”. Forbes discussed the ancient philosophy of Ikigai which is the point at which these things meet:– What you love.
– What you are good at.
– What you can get paid for.
– What the world needs.
Understanding the true purpose of your business, which is what problems you are solving for your world of customers, will help differentiate you from the rest of the pack. Get this right so that you and your entire organisation will know why they are doing what they do.
- Vision and Values
Understand and define what you truly value as a business. Use these as a filter to pass every business decision through. If an action or decision does not align with your values, then you simply do not do it. Understand and define what inspiring, shared vision of the future you are creating by living your business purpose and solving problems for your customers.
Understand what you need to be as a business and what you need to achieve to fulfil your purpose.
Establish your voice as an authority resource in your industry by continually providing educational and engaging content on social media. Amplify your business online, let the world know about the problems you solve and the additional value you bring.
- Solve problems
Solve problems for your customers and potential customers. Become the problem solving authority figure that, through your targeted marketing, you have shown your world you will be.
- Learn, Grow and Innovate
Listen to your market, engage with your social media comments. How well did you perform in solving your market’s problems? What did you do well? What could be improved? Learn and grow from the feedback, and innovate. Harvard Business Review published Vijay Govindarajan’s Innovations 9 Critical Success Factors here.
- Rinse and repeat
Understand where you can provide additional free or low cost value to your customers once they have purchased from you or transacted with you in some way. Return to step 4 and repeat.
The Race to the Bottom can often be a race that you sometimes were not aware you were actually in, or you may have even possibly started. The Race will continue to disrupt industries, countries, and continents. It even disrupts relatively new industries such as the app industry as explained in this video.
Once it has been identified that there is a Race or you are in one, focusing on differentiating yourself from your competition through the 7 steps, continually providing more value, and amplifying your business online, can help you win by not competing in a race with no winners.
Choose Good, Fast or Cheap, you can’t choose all three. And remember “People don’t buy what you do, they buy why you do it.” Simon Sinek.
If you need help, coaching, guidance or expertise in any of the seven steps, reach out to us at www.visible.com.au today to see how we can help amplify you and your business.