Nearly every small business wants to grow. To grow requires more revenue. That requires doing more business with your existing clients and finding new ones. We talked a little about existing clients last week. But how do you find new clients?
There’s a step before you can think about new clients. You need to think about you and your business. You need to understand why a client would choose your business over every other alternative out there. This is the ‘why’ of new clients.
What is it that your business does that adds value to clients or customers? What sets you apart from your competitors? What makes you and your products different?
This process is called ‘differentiation’ – it’s a key, overarching strategy. If you don’t differentiate, the only thing you have to compete on is price. Many times, a business will start with its owner doing cheaper what they used to do for an employer. The plumber who doesn’t charge a call out fee or discounts the labour for a job.
You’ve probably heard the expression ‘a race to the bottom’. Competing on price alone is exactly that. There will always be someone who will be willing to do a job cheaper, even losing money, in the hope of winning new business.
The more you can differentiate what you do, the more difficult comparison with your competition becomes. Successful differentiation moves you from competing primarily on price to competing on non-price factors, such as your products’ characteristics and how you sell and distribute those products.
You may not remember the electronics brand Goldstar. It made cheap, functional products. After an extensive assessment of what they did and how they presented to the market, Goldstar rebranded as LG. The product differentiation went from cheap, generic and poorly made to well designed, compact and simple. The tagline or positioning statement encapsulated the message: “LG: Life’s Good”. Very few people would know that LG stands for “Lucky Goldstar”.
When your product or service is correctly differentiated, it is apparent to the audience why your product or service is valuable to them. Value can take many forms – functionality, aesthetics, even the customer’s self regard or status. Where a customer perceives value, price becomes far less significant in the decision-making process.
Differentiation also needs to be defendable. You need to be able to prevent someone else from stealing that space from you; otherwise everyone else will do what you’re doing.
Where your business can’t be truly differentiated, you have to own delivery. You literally have to do it better than anyone else.
Many business owners struggle to encapsulate why their products are different from or better than their competition. It shouldn’t take more than a minute or two. If you can’t encapsulate why you are different, what chance does a prospective client have?
Referrals are critical for most small businesses. An important indicator of how effectively you are differentiated is whether a referral, when you meet them, can describe exactly what the referrer sent them to you. It should be a near-perfect regurgitation of your positioning statement.
Refining the differentiation of your product is hard. It takes a lot of work. A lot of thought. A lot of crumpled bits of paper – literal or figurative. Sometimes you need to make wholesale changes to your products and services. Sometimes you have to change how you describe what you do.
When you have appropriately differentiated your products or services, you have something valuable about which to talk to potential customers. As part of the process of thinking about what value you provide, you’ve also been thinking about the clients who need that value. The next step is to refine those thoughts down to identify precisely your ideal client. And then to communicate effectively to them. We will cover off how to do this in a number of weeks.
For now, focus on how to differentiate what you do and how you provide defendable value to customers. Focus on becoming LG and stop being Goldstar.