Background



Jim and Cheryl owned a retail store that sold high-end hi-fi soundsystems. It started out as a hobby - they were real audiophiles. Theysold sophisticated equipment in the higher price range to knowledgeablebuyers, like themselves, who understood the basics. They had a goodcorner location on a main thoroughfare.

The Problem

A competitor set up a store diagonally across the street with anadvertising slogan that scared my clients to the bone - "we will not beundersold." Jim and Cheryl's initial impulse to this challenge was tofight fire with fire by dropping their prices. They feared that theirestablished store would be driven out of business by a low pricedcompetitor.

The Solution

My counsel was quite the opposite. Rather than using pricing tocompete, why not keep prices high and compete on the knowledge thatthey acquired over the years, the service they provided from thatknowledge and the high quality of their product lines. They agreed andheld the higher price line. Together we developed a "compelling valueproposition" that included an after-sale guarantee on service as wellas an equipment trade-in feature.

The Result

Something quite interesting happened - business boomed for both stores!Customers were attracted to the shared location to comparison shop. Tomaintain margins and remain the "low price leader," the new competitorhad to carry the low-end equipment. Because they could now shop and seethe difference, customers with a preference for high quality andservice came to my client. Customers focused on low prices and willingto accept lower quality traded across the street. Both stores thrivedbecause they served different segments of the sound market.

Commentary

One of the hardest things to discover is the difference in customerpreferences. Without knowledge of customer preferences, the assumptionis that all customers are alike and want the same thing - and the truthis they don't. Given an opportunity, they will show you theirpreferences. Test the customer's preferences by offering differentlevels of product quality and service at different prices. Test, test,and test some more for .Youcan't know too much about your customer. They are different from eachother and from you. Discover their differences. It may take time, butknow your niche and .