Avoid the commodity trap by differentiating your value, not your price.
Tight pricing has ruled the landscape maintenance market since the start of the recession in the late 2000s. Large national companies, with predatory pricing models, have made it difficult for smaller companies to compete. The resulting frustration has led many to compromise, lowering their prices and service levels to stay viable.
In the face of this challenge, I believe that good companies, with strong selling points, can still find ways to differentiate themselves and stay ahead of the commodity curve if they learn to properly define and manage their value.
Customer behaviorists suggest that customers do not buy solely on price. They buy according to the difference between what they the company gives them—the benefits—and the price the company charges. This difference is customer value. The higher the perceived upsides and the lower the price of the landscape service, the higher the value of the service to the customer.
With my own company, we are 100% driven by a commitment to understand how our customers define value and what drives their every need. With that insight, we can strategically win work by going in low. But can then raise our price at renewal because we have innovated along the way and proven our ability to deliver an exceptional experience.
The secret is to be great at something. In my business, we look at our branded services as what these services mean to people. We strive for emotional engagement—we want our customers to feel good about choosing to work with us because we believe that earned trust has a value you can’t put a price on.
My team works very hard on trust. We have excellent account managers, the best in our market. We are experts in converting turf to quality xeriscaping alternatives, and our customers appreciate our leadership and expertise in what we do and why it matters to them.
But we also know that what got us here today won’t take us where we want to be tomorrow unless we strategically pursue an effort to consistently freshen who we are and what we offer in a way that separates us from everyone else.
Here are 12 ways you can use best practice approaches, avoid the commodity trap and maintain profits at low prices:
- Understand how your customer defines value.
- Know what drives their decision-making—their fears and frustrations, the problems they are trying to fix and why.
- Create higher meaning around the benefits of your services.
- Demonstrate your ability to improve the economical asset value of your customer’s property.
- Make your company a status brand and be seen as a thought leader, expert, or must-have service.
- Be known for what you’re best at.
- Institute ways to work smarter.
- Engage your employees and have them think and act like owners.
- Put the right people with the right skills in the right positions.
- Eliminate waste.
- Use technology to streamline operations and keep overhead low.
- Don’t allow your company’s high value solutions to be positioned as interchangeable services that could be acquired elsewhere.
“The bitterness of poor quality lingers long after the sweetness of low cost is forgotten.” – Benjamin Franklin