customers buy from the competition

Why Do Customers Buy From Your Competitors? Because They Can

Gee Ranasinha Marketing

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Finding new customers is a pain. Sure, servicing existing customers to the best of your ability, to meet if not exceed their expectations, is vitally important. But there’s only so much growth any business can achieve without generating sales leads from new customers.

Here’s something to think about: Unless your business has more than 50% market share (highly unlikely) then the majority of your potential customers are buying from your competition.

When I mention this to the stereotypical ego-driven business owner, their reaction is often a scrunched-up facial expression. “That’s only because customers don’t know how much better we are than the competition”, they’ll say. “If only we could get the word out – better marketing, sales, etc. – we’d be top dog.”

Sure, better marketing and lead generation will increase market share. But a reality many CEOs or CMOs can’t bring themselves to admit that, sometimes, customers are just happy buying from elsewhere.

Perhaps it’s that, regardless of industry, most businesses today do a pretty good job of serving their customers. Sure, some do it better than others. But if there was some kind of “customer satisfaction threshold” for the competitors selling in your market space, most of them would pass the minimum level.

Every business is upping their game – they have to. Apart from the occasional outlier, businesses have had to improve the presentation of what they sell and how they sell it in order to stay in business. Perhaps that manifests itself in creating an improved product or service, delivering more effective marketing, providing a better buying experience, or all of the above. No matter what it is, that threshold level continues to move upward.

Every Business Looking To Deliver A Better Customer Experience

The internet has had two major influences on this position. Firstly and most obviously it’s brought customers and brands closer together. No longer are you limited to buying a widget from the store downtown when you can buy it from pretty much anywhere in the world. In order to remain relevant, organizations have had to reconsider the value they’re providing over and above the supply of the product or service concerned.

The second effect has been in terms of a social proof quality buffer. In the old days you’d buy a widget from someone, find out it wasn’t very good, resign yourself to never buying from that place again, and move on. Today word of mouse – social media, online reviews, etc. – means poor quality has fewer places to hide.

A combination of increasing customer expectations with better service from the competition means the quality threshold bar is always being raised. This makes the challenge of finding new customers to increase sales and grow business revenue that much harder.

Customers Buy Elsewhere Because Of How You’re Treating Them

Do you know what the biggest source of lost revenue is for your business? It’s not your product, your pricing, or your distribution. It’s not your branding, marketing, location, or even your competition.

The biggest lost source of revenue for your business is the customer you didn’t even know about.

  • The customer who came to your website but left after 10 seconds because your site is too slow, or they couldn’t quickly and easily find the information they were looking for.
  • The customer who drove right past your store because it looked shabby from the outside, or there wasn’t convenient parking.
  • The customer who tried to call you, but hung up because they got lost in your automated menu system – “press 1 for sales, 2 for support…”
  • The customer who got so fed up receiving yet another irrelevant impersonal email that they unsubscribed from your list.

Ignorance isn’t bliss. It’s lost revenue.

Clearly it’s important to ‘stand in your own queue” – to take a step back and pragmatically evaluate the buyers journey from the customer’s point of view.

Many marketers or business owners will say they’re doing that already. But the issue is the ‘rating system’ is skewed. You can bring in all the management consultants, secret shoppers, or customer evaluation providers you want. The problem is they’re giving ratings based on your rulebook instead of your customers’.

Finding Meaningful Competitive Advantage (Hint: It’s Not “Quality”)

I speak with business owners pretty much every day. So many times when asking them about what they see as being their organization’s competitive advantage, they’ll use the word ‘quality’ as part of their answer. “We produce a higher-quality product”, “All of our people have a commitment to quality.”

Sorry to say this, but what a load of bovine excrement.

If you really believe ‘quality’ is the main competitive advantage your business has over the others, I have a bridge I’d like to sell to you.

Now I’m not saying the quality of your product or service isn’t important as part of a wider customer acquisition and lead generation process: of course it is. What I’m saying is your competitors see delivering quality as being just as important. The point is that, as far as the customer is concerned, the quality of whatever you’re selling – as well as whatever your competition is selling – is a given. Basing your competitive advantage or USP around ‘quality’ is like saying your taxi is better than everyone else’s because it has four wheels: the ‘fit for purpose’ part of the transaction is implied. Quality is useless as a describer of competitive advantage.

So should you focus around what you do better than the competition? You can certainly try, but in the real world it’s very difficult. Why? Because if we’re honest with ourselves, it’s probably not true. Unless your widget is so amazingly better than anything that exists anywhere else at any price, customers are going to keep buying elsewhere for reasons that make total sense to them. Today it’s extremely difficult to compete by being ‘better’.

Don’t for one second think of diminishing the quality of what your competitors are producing. Customers are buying from them and are happy with what they’ve bought. Perhaps you say your widget is more expensive because you believe it’s ‘better’ than what the competition sells. That may be true, but did you consider the possibility that, just maybe, customers don’t value ‘better’ in their decision-making process? Perhaps they’re happy with good enough and paying less. What’s your answer to that one, Sherlock?

Your meaningful competitive advantage isn’t about what you do well. Its about what you do differently than everybody else.

Knowing Your Customers Better Than Your Competitors Do

The real opportunity is having a greater understanding of your customers compared to the competition, and designing meaningful and relevant customer marketing experiences based on insights from such customer data. Delivering whatever you do ‘better’ in terms of providing greater value. Delivering it faster, easier, more conveniently, or whatever.

Customer retention is probably already a key component of your marketing and sales strategy. We know it’s easier to sell to an existing customer than to a new one. Yet in many industries a high customer churn rate are seen as the norm. Retaining loyalty is hard, and getting harder. Having to find a bunch of new customers every year just to offset what’s considered a ‘natural’ churn is not only a pain in the proverbial, but restricts ultimate growth.

But what if customer attrition was more to do with legacy sales and customer experience assumptions and processes, rather than some kind of business de facto behavior? Rather than putting it down to “that’s just the reality of our industry”, businesses could look at ways to better serve an increasingly demanding customer base.

Supposing you implemented a retention program to treat existing customers better. We’ve all seen businesses offer giveaways or incentives as a marketing tactic to engage with new clients. “Sign-up for 12 months and get your first 2 months for free”. “Take our credit card and enjoy a lower rate of interest for the first 12 months”. But where’s the love shown for existing customers? The customers who remain loyal, continue to buy, and maybe even recommend your business to their friends? What if you treated existing customers the way you treated new ones? What if – heaven forbid – you treated them even better?

Such customer retention strategies, properly implemented across sales, marketing, and support departments, could feasibly reduce customer turnover by a significant amount. Imagine if you could reduce customer churn from say 20% to 10%? What commercial effect on customer value would that have on your business?

What you Say & Do Is Not Always What They Understand

Not matter what you’re selling, there are people thinking about ways to disrupt how customers buy within your industry. Maybe those ideas are coming from competitors you know about, but perhaps they’re not. Think about how it took outsiders to disrupt industries like music distribution (Apple, then Spotify) or transportation (Uber) or accommodation (Airbnb).

The way you organise, design, and position your business may well be with the best intentions. But it doesn’t necessarily follow that customers perceive the process and value exchange in the ways you expect. If your marketing strategy is just doing what (you think) you’re supposed to do, you’re missing opportunities.

Take a step back to evaluate who exactly each customer interaction touchpoint is designed to benefit – you or your customer. Compare it to how your competitors buyer journey is perceived – then adjust accordingly.

About the Author
Avatar for Gee Ranasinha

Gee Ranasinha

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Gee Ranasinha is CEO and founder of KEXINO. He's been a marketer since the days of 56K modems, teaches marketing and behavioral economics at a European business school, and was noted as one of the top 100 global business influencers by sage.com (those wonderful people who make financial software).

Originally from London, today Gee lives in a world of his own in Strasbourg, France, tolerated by his wife and young son.

Find out more about Gee at kexino.com/gee-ranasinha, follow him on Twitter at KEXINO, or on LinkedIn at linkedin.com/in/ranasinha.

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