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The Difference

30th St. Station
Creative Commons License photo credit: A. Strakey

Ever considered “The Difference” businesses sometimes create between different types of customers in the same market?

It’s the difference between “them” and “the other them”.

Let me back up a bit and set a little context.

On numerous occasions, I’ve urged you to add premium services to your product and services mix.

One reason for doing this is that these premium services add higher profit margin services and attract more loyal customers. That doesn’t mean they are better people than the entry-level spenders. They’re higher loyalty customers because when price is a primary decision point for buyers, it’s natural (and proven) that loyalty to the vendor suffers.

That’s also the hopefully obvious reason why I nag you not to compete solely/primarily on price. No one ever sent their kids to college, bought a boat or went on a dream vacation using the profits made competing with WalMart on price.

Another reason I’ve suggested this is that these “higher rung” products and services provide a bigger profit margin per transaction, making it easier to afford to serve entry-level and/or more price-sensitive customers whose profit-per-transaction is smaller.

SIDEBAR: This is yet another reason to know your numbers for each product, each service and each customer type/tier that you serve. If you want to hire someone new, you can figure out how many “whatevers” you need to sell (or how many upsells you need) in order to fund that position.

Mister Flip Flop?

Now wait a minute. I just spent all that time talking about higher loyalty customers and bigger profit margins and then I justify it by talking about it making it easier to afford to do business with entry-level customers? Isn’t that a bit of a flip-flop?

Not really.

As you know, some entry-level customers will eventually climb your product/service ladder and transform themselves (perhaps with a little help from you) into the high-value, frequent buyer customers that I repeatedly suggest you court. Get enough of them and they will help your business hit its break-even point a bit earlier each month.

You should know (back to that sidebar) how many of these entry-level customers become a premium customer. That lets you predict future business more accurately. I suspect it’s obvious where that gets you.

One key to growing the premium customer part of your business is doing an ever-improving job of identifying what’s different about the customers who make that step up from entry-level. Work hard to identify these differences so that you can offer those customers timely opportunities to become premium customers.

Finally, after all that, we’re back to a difference, but not “The Difference”. You should be able to list these differences on command if I called you at 2:37am.

If you can’t, you need to get to know them a LOT better.

Fast, Cheap or Good

The most often seen characteristic in my recent observation of “The Difference” is about time. Premium customers tend to buy products that arrive on their schedule and use services that let them dictate the when. This usually comes at a premium price.

For example, when traveling from San Francisco to NYC, you can fly, take a bus or a train. If you fly, there’s a chance you’ll be late, but you’re more likely to be late on the train or bus. The premium/entry line in U.S. air travel has been smudged to the extent that it often feels a bit like third world bus travel.

“The Difference” also appears in how customers are treated when products/services aren’t delivered in the time promised. It reminds me of the old programmer’s joke: “Fast, Cheap, Good – Choose any two.”

Entry level services tend to dictate the when to the customer, and if the when is late or otherwise fails to at least meet common expectations, it’s likely that the vendor will apologize, yet do little or nothing to improve and move on to repeat the cycle. To quote a friend in Spokane, “And we wonder why they leave.”

Customers treated in this way get frustrated by the late, uncaring appearance of the services they use, but the price often has them.

Where “The Difference” again crops up is how these vendors treat those folks: Like a “them”. I can’t tell you how many times I’ve seen entry-level customers treated horribly.

It’s a mistake that can cost you an incredible amount of sales, both short and long-term.

Shrink The Difference

Where you can intervene is simple: Stop treating everyone “in coach” (so to speak) as if they are at worst, criminals, and at best, a bother to you.

Result: You’ll move more to “First Class” and see the results in your bottom line.

1 reply on “The Difference”

I agree that competing on price primarily is tough. Walmart has made a great deal of money. Yes competing with them is hard but they did pretty well. Also I Costco is doing pretty well. Amazon is doing great focusing on reducing costs to customers. I agree with you that you want to have much more than just a price focus. Make people value not only cheap prices but other things. Amazon does this well. I am not really sure a how well Costco does this.

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