The Power of Increasing
There are two main marketplace forces every business is dealing with right now – one is increased competition and price pressure.
The second is increased efficiency.
To use the second marketplace force to our advantage, we must understand the first.
Every business has experienced some version of a customer calling up and asking for their price on their products or services:
- a carpet cleaning company being asked for a quote over the phone
- a customer asking a pharmacy to quote on the cost of different prescriptions
- a customer walking in to a store with a listing of the best prices on a new TV from surfing the internet
Customers have access to pricing information, product details and buying options 24/7 online, and they are using that information to make their buying decisions.
If you are shaking your head and thinking yes, that’s happening to us and we are struggling and frustrated, then you are not alone. Every industry is being impacted right now.
The marketplace force of increased competition and price pressure is called commoditization.
Commoditization is when a product or service becomes indistinguishable from others like it and consumers buy on price along, making it a commodity.
The Profit Generator Program was created to specifically deal with this challenge enabling you to position your business so customers appreciate the value you provide and make different buying decisions.
That however is not what we are talking about in this newsletter!
You are dealing with the commoditization pressure on the front end of your business, but are you harnessing that very same pressure to your advantage when you are looking at how you run your business?
- For example, while you are dealing with an increased demand to decrease your prices are you also asking your suppliers for decreased prices?
If you are not asking for better pricing, you may or may not be getting the best pricing from your own suppliers! And what was true last year has probably changed this year.
- Are you shopping around for new and innovative options for the products and services you use within your business?
Many of the pharmacy owners I have worked with have changed to new innovative pharmacy software systems over the last couple of years.
Not only are the new systems less expensive to buy, provide dramatically better capability and function but the monthly support cost is so much lower, often the new system is paid for in little more than a year!
- Are you staying current with new technology products that may allow you to be more efficient and decrease your costs?
Business phone systems are a good example. Both the service costs and the systems costs have decreased dramatically over the last five years or so plus you have many more options to choose from.
A business owner I work with put in a new phone system that immediately cost him less monthly AND gave him added features such as direct lines and the ability to easily transfer between locations (from the customer’s perspective everyone appears to be under one roof).
- How about evaluating your workflow processes within your business and based on what you know now, are there any changes that would simplify them (ideally while increasing productivity!).
This is something to involve your whole team in.
Your team members are the expert at their role – they do the job and activities every day.
They will have many ideas on how small tweaks, adjustments or changes can improve workflow and productivity.
It can be as simple as changing where the filing cabinet is to reduce the amount of time walking back and forth.
FedEx is an example of a business built around an efficient back end system. Their hub set-up meant they could deliver packages overnight – guaranteed (it also meant people were willing to pay more for their service!).
Southwest Airlines created different ways of moving a lot of people at a low fare while being friendly and fun.
They have continued to have a focus on evolving and simplifying how they operate and have been the only major airline that has been consistently profitable year after year.
Commoditization pressure is forcing efficiency throughout the whole system.
This is something you have control over – use it to develop your competitive advantage!
How are you increasing efficiency in your business?
Let us know your thoughts on today’s issue.
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