Price Versus Value: You Get What You Pay For

Those of you who have seen me speak, and have read my newsletters and blog, know my opinion on selling price. I don’t believe in it. It’s not the smartest thing you can do. Well, the same goes for buying price, and I can tell you this from a recent personal experience.

At Christmas, I wanted to buy my son a pair of wireless headphones he could use for his Ipod. I went online, found what he wanted, and bought them from a company called Page Computer (the lowest price). Remember that company name because if you ever have the urge to buy anything from them, call a Neurosurgeon and schedule yourself for a lobotomy.

Weeks went by and no headphones were delivered. I went online and the order said “shipped,” but the package was not traceable. I called the phone number on their website and let it ring about forty times with no answer. In fact, that happened a few times. I finally just called the credit card company and told them to put the charge in dispute for the sake of getting a refund.

In the meantime, I took one last stab at Page. I emailed them and informed them that if I didn’t hear from them I would consider the money stolen. I did get an email back, saying they can’t find the shipment (no kidding). Eventually, after numerous emails, they agreed to credit my account. Of course, a couple of weeks went by and no credit. Finally, the credit card company called and informed THEY would credit my account.

The other experience came with an online pharmacy. My dad gets most of his prescriptions through the VA. On the rare occasions that the VA can’t fill his request, I use an online pharmacy in Canada, Jandrugs (1-866-395-3784). Their prices are great, but their service is even better.

However, this one time last week, I needed a prescription filled that the VA couldn’t fill. When I looked online, I found another Canadian pharmacy, Planet Drugs, who was actually much cheaper than Jandrugs. I called Planet and was put on hold forever, and then I was cut off. I called back and was put on hold forever again. Finally, I got a recording that asked me to leave a message. You don’t want to know what it was.

I then called Jandrugs; they picked up on the first ring. A very nice young woman took my order and informed me that she didn’t know if the drug was in stock. She couldn’t estimate a ship date, but she would find out and call me back. Ten minutes later she called me back to tell me they had it and the date. Jandrugs also called to find out if I had any questions about the drug and its side effects. A very quality company.

In order to sell price and be the cheapest, companies usually have to cut somewhere else, which usually means people and service. In the long run, this means to me that they’re just not worth it. In fact, they’ll probably end up costing you money.

In the case of Planet Drugs, I didn’t want to take a chance since their low price could be reflected in the quality of the product.

Things that sound dumb, but are true: “You get what you pay for.” I don’t think truer words have ever been spoken.

Competing with Wal-Mart

Why are so many people afraid of competition? Business owners and executives live in fear of competition coming into their market. Government workers panic when they hear the word “privatization.” Whole countries threaten to put up a protectionist wall rather than have to compete on the world stage.

Try mentioning the word Wal-Mart at a meeting of the Downtown Merchants Association. You just might find yourself the owner of a new suit made of tar and feathers.

Of course what many people don’t realize is that competition is good for us. It makes us better. As an athlete, it’s great for your ego to compete against those who are not nearly as good as you. But the only way you’re going to get better is to test yourself against the best. It’s the same in business.

Often, I’ve heard people get excited about an idea for a new business based upon the fact that “No one else is doing it. There’s no competition.” While there are times that can be terrific; many times there’s no competition because there’s no need for the product or service.

Don’t let competition scare you. It could just mean there’s a tremendous need for what you do. Another great thing about competition is that most of the prospects and clients there are likely quite familiar with the product and service. You don’t have to go through a long explanation of what it is that you do.

The other thing the prospects and clients all know about your product is that it costs money! Don’t laugh. Have you ever tried to sell to someone who didn’t know the first thing about your product or service? No matter what price you quote, they’re shocked, “Wow, I never realized it cost that much.”

Retailers have heart failure when they hear, “Wal-Mart is coming!” So what. Wal-Mart brings traffic; if you’re shrewd enough then that traffic means more potential customers and more money. If you don’t believe me, look at what’s going on in some of the malls around the U.S:

According to the Wall St. Journal, “Some mall owners are rolling out the welcome mat for the retail behemoth. They see Wal-Mart and its competitor Target as a replacement for the traditional department store anchors that have been shrinking with the demise of onetime stalwarts such as Montgomery Ward and the consolidation throughout the industry.” (Nov. 22 , 2006)

According to the article, Hanover Mall in Hanover, Mass. credits Wal-Mart for boosting mall occupancy to an expected 97% in 2007 from 78% in 2003, the year before Wal-Mart replaced a closed Ames discount store.

At Grossmont Centre in suburban San Diego, 21% of shoppers who enter its attached Wal-Mart anchor end up inside the mall. The mall had an 18% vacancy rate and sluggish sales until Wal-Mart replaced a closed Montgomery Ward. Now the vacancy rate is near zero and sales for existing tenants are up 26%. The same thing is happening at many other malls throughout the U.S.

A rising tide lifts all boats. Competition forces us to be sharper, smarter and better at who we are and what we do. It makes companies more creative, flexible and customer driven. I fail to see how any of that is a bad thing.

Why Customers Buy: It’s In the Details

In 1955 when Disneyland opened, the Disney people conducted exit surveys of the many customers asking them what they felt was the most memorable thing about the new park. With all the fun things to do and see, the #1 thing that impressed the customers was the cleanliness of the rest rooms.

In a competitive business environment, it could be the smallest detail or first impression that wins or loses a customer’s business. When my family and I were relocating from New York City to Chapel Hill, my wife and I interviewed salespeople from three moving companies. The one we hired was not the cheapest by any means. We hired the company whose salesperson bothered to be on time for the appointment.

Not only did he give us the feeling that he wanted our business, but I figured if someone from a moving company can’t be on time to take my business, what chance do I have of my furniture and possessions arriving on time. What really clinched it was when one of the salespeople told us the reason she was late was because she was very busy. Needless to say, her appointment didn’t last very long since it was obvious we were not important to her.

Just because something might not be important to you, doesn’t mean it won’t be important to your customers. Things like being on time, returning calls in a timely manner and sending out thank you notes might seem small to some of you, especially since they’re so easy to do. To me, when someone is willing to go the extra mile to make sure the smallest details are covered that tells me they value my business. Besides, if you’re not willing to do the easy things, what would make a customer believe you’d ever be willing to do the big things?

Competing Against Big Box Retailers: Reponses

In my entry, Competing Against Big Box Retailers,I told the story of how Omega Sports, a local sporting goods chain, was able, through shrewd merchandising and great service, to win me over from the big box national chain, Dick’s Sporting Goods.

Well, in just the last week, I’ve run across two other people who have had the same experience with Dick’s, showing once again that it is possible for David to beat Goliath.

The first response came from Dean in Wilmington, NC, which is about 150 miles from Chapel Hill:

“Hey Warren! The same thing happened to me. There’s a Dick’s and Omega Sports 3 miles from each other here in Wilmington. I switched from Dick’s to Omega Sports when I was involved in local triathlons because the Dick’s associate was, for lack of a better word, a _____ (well, you get the idea), and knew nothing about running shoes. They also do not carry a special speed stick to help prevent chafing called Body Glide. I went over to Omega Sports and not only did they have Body Glide, but the guy selling the shoes was a long distance runner. Let’s just say I’ve purchased a boatload of shoes from Omega over the years. So this was an apt comparison!!!"

The second response happened on my recent trip to Junction City, Kansas, where I spoke to 300 agents from American Family Insurance Company. I told the audience my Omega Sports vs. Dick’s story. Afterwards, a woman from the audience came up to me to say she had a similar bad experience with Dick’s.

Like me, she was also looking for swimsuits and other swimming equipment as her son is a swimmer. After dealing with Dick’s famous “No selection, no service,” policy, she went to a local downtown store in her small Kansas town and found the same great selection and service I found at Omega Sports.

As a small retailer, trying to compete with a large national chain is not easy, but if it were, everyone would do it. You have to be willing to change the way you do business, or at least get a lot better at it. But, as Omega Sports and others have shown, it can be done and done quite well.

Competing Against Big Box Retailers

When we first moved to Chapel Hill in 1997 the only half-way decent sporting goods store in our area was a place called Omega Sports, although to call Omega half-way decent was a bit of a stretch: their selection was weak, their prices high and their service indifferent.

About two years later, Dick’s Sporting Goods opened a store in the same mall, a few doors down from Omega. My son, Michael, and I were ecstatic; finally a big-box sporting goods retailer where we could get anything we wanted.

Dick’s is one of those monster retail chains that’s supposed to put small stores out of business. My prediction at the time: Omega wouldn’t last 6 months. Well, here we are 7 years later and not only is Omega still around, but they now have 14 stores in North Carolina, more on the way and pretty much all my sporting goods business!

The reason many small retailers are put out of business by monster chain stores is two-fold:

1. They weren’t that good in the first place. Like Omega, many small retailers have lousy selection, high prices and poor service. But because they have no competition (until the Wal-Marts and Dick’s of the world come rolling in), they’re able to do business.

2. They just keep doing what they’ve always done and expect to get what they’ve always gotten. How can you be crazy enough to keep doing the same thing when the whole structure of your marketplace has changed? If your prices are high and service is lousy, do you really think you’ll be able to compete with Wal-Mart?

What Omega did was change with the times and decided to fight the competition not on what Dick’s did best (price), but on what they could do best. First, they improved their service. The people at Omega are attentive, courteous and most of all, knowledgeable.

Next, they stopped trying to be everything to everybody. While they carry merchandise from a wide variety of sports, they specialize in certain sports. For example, I’m a swimmer and not only does Omega carry a vast selection of swim suits and other equipment such as, goggles, fins and hand paddles, but they carry them all year round. With the numerous strong club teams and masters teams in the area, Omega captures a lot of the local swim market.

They do the same thing for runners, soccer players and volleyball players. Going narrow and deep in areas where the competition hasn’t allows them to compete and win.

Don’t compete on what the competition does best and you don’t. Compete on what you do best and they don’t.