Are you tired of competing on price?
Introducing the Bankruptcy Gap.
Remember when there was only one Tide laundry detergent? I counted last week, there are now over 70 sizes, types and smells of Tide at the supermarket. There are versions for top load washing machines, front loaders, for smelly clothes, for whites and even a version in a tube that you can get the coffee stain off the front of your shirt at the office.
What about personal computers? When I first started selling PCs in the 1980’s (ancient history I know) there were 3 or 4 major brands, each with 3 or 4 models. I remember years later when just Hewlett Packard had over a hundred different models, sizes and flavors.
Who would go to a travel agent these days? They have gone the way of 8 mm camera and betamax and are being followed by newspapers it seems.
These are all examples of The Bankruptcy Gap.
When you look at any market or industry there is a bell curve for the distribution of products. At the low end of the curve are the low price/low cost products and services. At the high end, the right side of the curve, are the high value and customized offerings.
Over time as competition increases the biggest part of the curve inverts itself into what is known as the bankruptcy gap. This is caused as the products become 1.) more of a commodity and the customer opts for a lower price or 2.) the products become tailor made, luxury oriented, or more “experience” based.
Organizations no longer wait for these natural changes to occur. More companies are taking proactive and strategic steps to address the oncoming train. For those not willing to cut their costs the only choice is to learn how to move “up the food chain”, to develop a brand, to connect with the customer in new ways or to fine tune offerings.
A few days ago I spoke to a large Chamber of Commerce. I mentioned one of their sponsors, a company called Moving Solutions. I referenced them as being in the middle of the bell curve with their Moving Vans and the typical household who was relocating. I was amiss to point out that they were smart to move up the food chain. They have become movers of choice for the Rock and Roll Hall of Fame, for several high tech and medical companies where advanced expertise were required. (Sorry about that Mr. Bill) If a moving company can be smart enough to morph their business, what does that say about you?
What do you need to do?
If you are competing on price then you better lower your cost or employ more technology. Just ask Amazon, Progressive Insurance or Wal-Mart. There has to be a constant strategic focus on getting cost out of the business and products OR you had better leverage with technology.
If you are tired of the price wars then the answer is to start owning your category of one. Plus your products and services, learn how to brand yourself (call Kordell), get closer to your customers and focus on THEIR business and how you can help them win more. Look at FedEx, Disney, Burt’s Bees, Five Guys Hamburgers, Alan Weiss and Lexus.
The light at the end of the tunnel is a train filled with the cheap offshore labor. If you are not considering your strategies to move away from the commodity business you will get run over. Not fun for you but entertaining for your competition.