Quality is the key route to increasing market share. Market leaders
tend to share several key characteristics: They tend to have higher
quality than their competitors. They compete on quality not price. They
tend to benefit from unique proprietary rights such as copyrights,
distinctive trademarks, patents, and trade secrets. These proprietary
rights provide them with unique sources of quality. “Quality” amounts
to no more than delivering those products and services customers most
want. This type of quality is NOT the conformance to the specifications
type of quality that most engineers focus on, but is instead
conformance to customer wants of the type most marketers focus on. They
neednʼt be of particularly high quality just superior to that of your
competitors. Donʼt buy market share with low prices. This is
self-defeating and capital intensive. The value of what you gain is
eaten up by its cost of acquisition.
Never sell on price! Never sell on price!! Never sell on price!!!
The only time selling on price is acceptable is if it is part of an
overall strategy with a credible end game resulting in pricing power.
The Justice Department is filled with attorneys who have decided that
consumers have rights granted to them by the United States constitution
to never-ending price discounting. The word competitiveness has become
interchangable with the word cheap. As if the only way to compete is on
price.
Back in the day a sales rep was ashamed if he left any money on the
table. When you won a large account the first thing the sales manager
asked was where was the other guy? How much dough did you leave on the
table? Yes, I know some of you reading this will consider the notion of
trying to raise price, as quaint or out-of-touch. But my point here is
simply the fact that monolithic competitive strategy based upon selling
the lowest price continues to decimate global industries.
The key to long term sustainable market share is quality. Not
Tiffany or Rolls Royce quality, but good stuff, that works well and
creates an emotional bond with the customer. Steve Jobs at Apple
Computer is one entrepreneur who understands this. The niche he has
crafted for Apple is strong, vibrant and continues to grow. Customers
love Apple products. His Ipod strategy is perhaps one of the most
ingenious product launches ever. Why is Jobs so succesfull? Not because
he listens to customers. But because he instinctively understands what
works. And what sells. See Steve designs stuff he wants.
I have long railed against CPA’s and lawyers in the executive suite
because of their lack of vision. Law school and most MBA programs breed
the Steve Jobs out of the system. What you end up with collectively can
be found in the executive suites of major airlines who never really
figured out how to run an unregulated industry.
Consider this…every time you introduce a new feature or service
you should raise price. Alternatively, if you can’t get more money for
an improvement should you offer it anyways and eat the cost? Or, better
yet, what do you do when your idiot competition continues to give away
the store? Even as their margins erode, bank accounts drain and credit
lines evaporate?
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