Why businesses fail (part 4): they don’t do the work needed to be different and better

We’ve all seen it. An entrepreneur opens a new business, but before long we notice it’s closed.  They ran out of money before the business broke even. The time and money they spent is gone, and their lender may have a claim on their home and other assets.

How does this happen?

peacock-mark-wheadonA wise person once said, “There’s lots of competition for average”. If you’ve identified an important customer problem, they probably found a way to address their problem before you came along. Prospects can compare ratings, reviews, and prices for you and your competitors online. If you’re no better than everyone else, why should the customer buy from you?

What should you do instead?

You need to create a competitive advantage based on what your target customers think is important. Federal Express knew that its customers needed fast reliable delivery, and their message was “when it absolutely, positively needs to be there overnight”. Superior product design has driven Apple’s success, while low cost keeps customers coming back to Wal-Mart and Costco. Whatever you think about the health value of their menu, McDonald’s wins with consistency, cleanliness and service.  The luxury hotel chain Ritz-Carlton focuses on the needs of their high-end customers, using the slogan “ladies and gentlemen serving ladies and gentlemen”. They share their knowledge with other companies through the Ritz-Carlton Leadership Center. Their quality is regularly praised in the influential Zagat Survey.

Whatever your customer’s definition of quality, you need to deliver excellent value at every point where the customer interacts with your company. This means your email newsletters, how easy your web site is to navigate, your sales process, delivery, billing, and customer service.

On the positive side, think about the online shoe retailer zappos.com. Their sales process is very smooth. They offer free shipping on all domestic shoe purchases. If you’re not satisfied with the shoes when they arrive, you can return them in the original packaging for free. You can return items for up to 365 days, as long as they are in the original condition and the original packaging. Zappos.com has a customer testimonial page with almost 10,000 testimonials. They set the bar pretty high for on-line and physical shoe retailers.

On the negative side, remember the YouTube video “United breaks guitars”? Lots of other people do. It was viewed more than 10 million times. And General Motors probably wishes it had done a better job replacing the defective ignition switches on the cars it recently recalled.

SCORE counselors are available locally or on-line to help you create and manage a successful business. Call us in Pinellas County at (727) 532-6800 or go to  www.pinellascounty.score.org.

Photo courtesy of Mark Wheadon via creative commons license


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