Two distinguished business leaders addressing separate general sessions at the 37th annual NTEA convention and T3 exhibition brought home a similar message to the attendees — business is more competitive today than it ever has been, and if you want to stay in business — think about your business leadership role more often, provide things that your competitors aren't, and search out for information concerning other business philosophies.
Sam Geist, a former national marketing expert involved in the competitive garment industry, and Warren Greshes, a former owner/operator of a nationally recognized sporting goods chain, used markedly different approaches to broadcast this message; nevertheless, they both drove home the idea that in today's business environment — there is no room for error, either in how you think about your business, or in your execution of your business practices.
The speakers also held the common belief that to improve your business, you have to look outside your own business, and even your own industry. “Ninety percent of what we learn about business techniques and philosophies is from outside our own business,” Geist said. “And 80% of what we learn is by doing.”
Both Geist and Greshes prompted attendees to think about their own business by looking at several examples from outside the truck equipment distributor industry.
Geist and Greshes discussed the business practices of several nationally recognized companies. They did not present the history of a specific company that included past earnings or product introductions. Instead, they described the philosophy behind the successful company's practices and strategies.
Geist and Greshes asked the audience to listen to the ideas in the light of several self-examining questions:
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Do you know, or do you just think that you know, what your business is really about?
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Who are your real customers?
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Are you really marketing your total package of products and services to them?
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Are you differentiating your company from your competition?
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What is your customer's point of reference?
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Are you providing leadership to your company?
Asleep at the Wheel
“Thirty years ago, Sears didn't believe in, or even care about, Wal-Mart,” Greshes said. “Today, I wonder if Wal-Mart is deeply concerned about Sears' existence.” Although Greshes does not say that Wal-Mart's growth came at the expense of Sears, he does theorize that Wal-Mart's correct understanding of who the customer is, how the customer makes purchasing decisions, and what services the customers want bundled together, made Wal-Mart a competitor on the national level of Sears.
Geist, who also elaborated on the success of Wal-Mart, emphasized that Wal-Mart has been successful in defining its customer base. According to Geist, Wal-Mart moved closer to buyers by placing stores on the main thoroughfare in suburban locations. Wal-Mart brings customers more of the merchandise that they want on a daily basis because of the company's extensive communication and logistics infrastructure.
“A penny saved is not a penny earned,” Geist said. “Your pennies have to come from outside the company. That's what growth is about.”
Both speakers acknowledged that Sears has a different type of customer than Wal-Mart's, and that each has a different product mix. But both speakers credited Wal-Mart's spending on infrastructure. “Any Wal-Mart can have a holiday weekend, be completely sold out of merchandise, and by Monday morning the shelves are completely restocked. Go into almost any of Wal-Mart's competitors on a Monday and see what their shelves look like,” said Geist.
Geist and Greshes elaborated on the business philosophies gained from looking at both of these companies in relationship to each other. Geist said, “Your competitors are after your business because they feel that they can provide that service better than you can do it.” Many of Wal-Mart's competitors never saw the growth that Wal-Mart was experiencing until it was too late, he said.
Greshes said, “You don't know where your competition is coming from. It could be the Internet or it could be a regional player that decided to come into your territory. But the fact is that there are competitors that are going to go after your business. It doesn't matter that your company has been the market leader for 30 years.”
Differentiation
“You can't just be happy selling items as everybody else in today's marketplace,” Greshes said. “You can't be relaxed and in the middle somewhere. The middle is dead. There is no middle in today's business environment. You have to differentiate yourself from your competition.”
The concept of differentiation was a strong focus point of both speakers. Geist asked, “Why should anyone do business with you rather than with someone else?” Greshes said, “You can buy almost anything in the world today at almost any time. You have to differentiate yourself from your competition to stay in business.”
Geist and Greshes agree that being the low cost provider isn't a differentiation strategy. Geist said that there is too much of everything. It isn't products that necessarily differentiate one company from another. Companies with competitive products and prices abound everywhere. “You have to brand and differentiate your company as the best service or product supplier to customers, from their point of reference.”
“You have to stand in front of your competition. You can't just compete on price,” Greshes said. “Pricing is not a differentiation technique. Continually lowering your selling price, or having the lowest selling price never makes you indispensable to a customer. It only makes you easily replaceable.”
McDonald's proved to be a leader in using differentiation strategies according to both speakers. Greshes describes how McDonald's realized that it sold commodity items, namely hamburgers, french fries, and soft drinks. “How many of you have kids?” Greshes asked. “When the kids say they want a hamburger, french fries, and Coke — you make the buying decision as to where to go to fulfill their request.
“McDonald's understood that the parent was making the purchasing decision, most likely based solely on price. What McDonald's marketing executives did was ingenious. They put a $.50 toy in with the hamburger, french fries, and Coke. Then they gave it a special name, calling it a Happy Meal. Then they marketed it to the kids.
“Have you ever had your child ask for a Happy Meal? There's only one place you can buy a Happy Meal. And that's at McDonald's.”
Greshes added that by truly identifying its customers, McDonald's has been able to incorporate other forms of differentiation. He uses the example of McDonald's ability to market food products to people that are rushed and constantly placed in a time-constrained environment. McDonald's knows that some customers go to its stores to take a quick break from their day's activities and not because McDonald's was able to make their food ten seconds faster than a competitor. So McDonald's marketing executives then put together the phrase, “Have you had your break today?”
Greshes sees this as a very successful way of differentiating McDonald's from other fast food competitors. “They've taken competing on price right out of the picture,” says Greshes. “They bring you quality, convenience, service, and value — and they make you feel like you are getting a break in your hectic day.”
Both Geist and Greshes strongly promote the idea of offering value to the customer and not attempting to win a customer with price. “Remember, competing on price is not the successful way to operate a business,” Greshes said. “You have to offer quality, convenience, service, and price. Those items will be the hardest things for your competitors to duplicate.”