HOW TO COMPETE WITH THE INTERNET
by Martin Grunstein
For many years at conferences one of the questions I often get asked is “how do we compete with the prices people can get on the internet?”
My answer is always the same.
I tell people that the internet helps people make bad decisions quicker!
If a business provides nothing more than a basic product at a price, I may as well get that product cheaper on the internet – but I hope YOUR business doesn’t provide a basic product at a price because the only businesses that can survive with that strategy are the huge mass merchandisers who make their profit from high volume, low margin transactions.
If you are competing with the internet or any high volume, low margin competitor, you need to sell what they are NOT selling and that is things like peace of mind; service; stress management; added value etc.
Let me give you a classic example from the travel industry which is an industry that really competes with the internet because more and more people are booking their flights on line.
A customer was organising a trip from Melbourne to London and a few other places in Europe with their travel agent. When the travel agent organised the itinerary and did the quote the client came back and said “I’ve been doing some investigation on the internet and I can get a flight home from London to Melbourne $500 cheaper if I book on line.”
The travel agent, who has access to the same internet sites, said that there was no way she could match that price and left the customer to organise the travel herself.
Everything proceeded smoothly until the customer came to the airport to board her cheap flight home. It turned out the flight was going to Melbourne, FLORIDA in the United States rather than Melbourne, Australia. It took the customer time, money and huge amounts of stress to get back to Australia and she never questioned her travel agent again when it came to booking airfares. And the travel agent has a story to tell all her customers who suggest that they can get something cheaper on the internet.
Now, the travel agent sells stress management rather than cheap airfares and this is a much less price sensitive product to sell.
This applies to all industries.
A golfer turned up to his regular Saturday game proudly showing his mates his new driver. He proudly told them that this driver normally costs $700 but he got it on e-Bay for $499. Four hours later after hitting every drive badly he told his mates sadly that he was putting it back on e-Bay and was hoping to get $100 for the club. If only his local golf pro or retailer would have told him that he can have a free trial of any club he chooses to make sure it suits his game before he makes the purchase, maybe that would have saved him a lot of money and even more embarrassment.
That’s how to compete with the internet. Sell risk management and peace of mind, not a commodity product. The travel agent shouldn’t have been selling a point to point airfare, she should have been selling “I’ll take the worry out of everything for you, you just enjoy your holiday”. If you’ve seen me speak, you will have heard my story about six dollar haircuts (if you haven’t heard the story please go to my website www.martingrunstein.com.au, click on “articles” and read AN ATERNATIVE TO PRICE DISCOUNTING). Well, there are lots of “six dollar haircuts” to be found on the internet.
Of course there are lots of genuinely good deals for genuinely good products and services on the internet but what you’ll never get from an online transaction is a relationship with an individual you can trust and accessibility to someone who can reassure you about your decisions if you are feeling nervous. Now, that may not be tremendously important in ordering a home delivered pizza but I think it has to count for something when I am planning my financial future; or going on a round the world trip for the first time; or even investing a significant amount of money in a golf club.
One of the key points I make in seminars is “you don’t fight fire with fire, you fight fire with water”. Don’t do what your competitor does, do exactly the opposite! If he discounts his price, you reinforce the value added services you provide to show that your offer has more value.
A classic case where this was successful was in the steel industry. I was working with BHP in the mid nineties when steel imported from Asia started to have a significant effect on the Australian company’s sales and profits. We developed a great sales strategy against the imported product. “Is it worth saving a few dollars a tonne on steel if there is a union dispute and you can’t get the imported steel into your construction causing your whole project to be delayed? That will never happen with Australian made BHP steel.”
The nineties was not a time of turbulent industrial relations and most imports got into the country on time. BUT WE SOLD FEAR and some of the companies didn’t want to take the RISK that their whole project would be held up so they paid a little more for the local product. Peace of mind was a value added that was worth the price difference in the minds of some of their customers.
I think you have to do the same to compete with the internet.
If we use the golf club example, the retailer should sell the following value added: Try my whole range of products so you can choose what suits you best; Take a trial club for a round or two to make sure you can get results with it on your course before you buy it; I can even have a look at your swing and give you a few tips that will help your game as well as getting you better results with the club. You can also ring me any time to ask any questions you may have about the club or golf in general; And I’ll remember you when you come back for another purchase and we can work together to help you get the most enjoyment you can from your golf.
Where are all the above value added when I pick up a “cheap” club overseas or on the internet? They are just not there.
But the timing is the key issue. We need to communicate the value added BEFORE the customer makes the purchase.
If you are losing business to the internet, the chances are you are not communicating effectively to the marketplace what they get from you apart from the basic product at a price. The solution is to stop selling the product, sell risk management; sell convenience; sell your human relationship; SELL FEAR!
Martin Grunstein’s results with over 500 Australian companies across over 100 industries has made him Australia’s most in-demand professional speaker on Outstanding Customer Service. He is contactable by phone on (02) 96623322 or by email at firstname.lastname@example.org.
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