You know how they say down at the seminar, “It’s all about quality, service, and price?” Well, it isn’t – it’s about price, product, and sales activities.
Somewhere along the line, many of us took Econ 101 and we bought into the simplistic fiction that “as price goes down, demand goes up.” And, “as price goes up, demand goes down.”
But they never actually taught that in your Economics class because that’s not the law of supply and demand. The fact is, there are , not a single law, of supply and demand. Yet, about all that anyone remembers from their Econ class is the law of perfect competition – where supply and demand do have a direct correlation but only under very specific circumstances, including that all firms sell an identical product.
Why ‘perfect competition’ doesn’t apply
Well, ice isn’t ice, so to speak. Ice isn’t ice as coal is coal, or as wheat is wheat, or as a share of IBM stock can substitute for another share. The biggest difference between my ice and the ice from the guy down the street is that, with my ice, you get me and my company and my years of experience in doing exactly what you need.
Also, in that perfect competition scenario from Econ 101, there has to be perfect information. All buyers and all sellers must know of all prices as each transaction occurs. Heck, it’s hard enough getting two people in the same company to come up with the same price, let alone match the guy in the next town.
Finally, in perfect competition, there must be no scarcity. Is there scarcity in ice? Dang right there is. “It’s the 4th of July, bring me ice, Yes, it can be done, but not every company can do so – which illustrates the scarcity in ice.
So, perfect competition doesn’t truly apply to the ice market. As a result, cutting our price by any amount, say 1/2 will not result in twice as many sales. Instead, we need to focus on. Why? Because, that’s where we truly operate, and you have to keep in mind the three rules here if your company is to truly prosper.
Price, product, sales activities
What are the rules in a monopolistic competition industry such as ice? Price, product, and sales activities. Let’s take a look at each.
Price: Price matters within a class. For example, Lexus is a low-priced auto within the luxury-car class. Mont Blanc and Bic both make pens, but one isn’t a substitute for another. So, within the class of ice companies capable of delivering in February when required, price matters. But if a buyer needs ice on a given holiday or for the entire summer season, only ice companies of a certain size or with lots of storage or with ???, who can do that matter.
Therefore, we should sell to what the customer needs, not necessarily what they want now. That’s because, as you do so, you narrow down competition from all ice companies to only those that can provide what’s being specified.
Additionally, selling ice is like selling anything – you need to focus your approach, refine it. Now here’s obviously a blatantly weak offer: “I sell everything, do you want to buy something?” Much stronger, however, is: “I can deliver the packaged ice you require all summer long, especially during the holidays, to your stores throughout the state. Can (or has) your current company?” It begs the question of “how?” or “tell me more.” It also serves to limit your price competition to others who can do the same thing (versus all ice companies or ice makers that can make ice).
Product: I find that some companies tend to take this attitude thinking they’ll win business, “You tell me exactly what you want done and I’ll do it – or we’ll make it up to you, (fill in what you’ll do here).” Huh? A professional knows more about what the customer’s needs than the customer does, and his company oversees translating those customers’ needs into real action.
This may require some thought. Why do we print a beautiful bag in full color? Is it because that’s what the customer requests? No. It’s because full color draws the buyer (consumer) and ensures a higher rate of recognition and sale. Full color adds to the luxuriousness of our product, which supports a higher price. Reasons, not specifications.
And so it goes, the need of the customer is identified and then serviced by adopting the proper product(s), merchandiser, point of sale visuals, etc. So, price matters only within the class of companies that can provide the product that best serves the customer’s needs. We just need to remember to reinforce that fact with the customer when we make our presentation.
Sales activities: The third component is sales activities. Without doing this, the customer or prospect never knows you can provide the right product at the right price.
We don’t, as an industry, seem to provide our prospects with top of mind awareness (TOMA). We don’t proactively use our ability to create points of interruption, call customers on a routine basis, or don’t always verify who the real buyer is at a prospect’s office so know we are talking to the right person. Instead, we often wait (or hope) for the customer to come to us to beg to buy. Remember, as few as 25 customers can represent 40-65% of our total sales, and we often sit amongst several ice businesses in our region. So why is it that only when one of our big customers leave do we panic? Because then it’s usually too late.
So, it’s not quality, service, and price, and the customer can pick any two that they want. NO, it’s price, product, and sales activities. Especially sales activities. And the customer needs to get all three. That’s what makes the difference between prospering and just bumping along.So, it’s not quality, service, and price, and the customer can pick any two that they want. It’s price, product, and sales activities. Especially sales activities. That’s what makes the difference between prospering and just bumping along.