David competing with Goliath...small business CAN compete effectively!

Many small business owners occasionally get the feeling that they are fighting an uphill battle. They see businesses all around them which are larger, more powerful, and seemingly immune to the ups and downs of small business cycles. It sometimes feels like they are really incapable of competing because they don’t have the enormous resources and other advantages of big business.

Have you ever felt that way?

When I meet with clients who are experiencing flat or declining sales, our discussion often turns to their USP (Unique Selling Proposition). Their USP describes how they differentiate themselves from the competition, what makes them unique, and why customers would want to buy from them. It is often something that they have not revisited for some time and is in need of major overhaul.

If you think you have it “bad” in your competitive space, imagine how a burger joint owner might feel when a McDonald’s opens up next door!

Consider this next question, then, and see if there is a ray of sunshine coming through your windows…

Can a local fast-food retailer develop a successful promotional effort in the face of McDonald’s huge advertising campaign?

The answer is yes, but to be successful it has to be based on differentiation. Additionally, if one agrees that McDonald's has captured a major portion of the mass market, then one would logically be attracted to strategies that would be more easily achievable than simply replacing them or competing head to head, given their now substantial resources.

The USP discussion would inevitably gravitate towards a niching strategy where one could ostensibly bring an amount of resources to bear on a market that is either under-served or unnoticed by the competition. But can you really compete by just making a better burger?

An example would be "5 Guys Burgers", a chain with 331 stores (as of October 2008) that prices its burgers at roughly twice the price of McDonald's. Do you think they are successfully competing? You bet they are, and it’s obviously not with $1 meals or any other low price offerings. They compete by clearly defining their USP as something quite different from the “major” competition. They differentiate themselves by using only high grade peanut oil on their fries. I personally don’t know if that is better or worse than other places, but they flaunt it every chance they get. They serve free peanuts in shells to anyone who wants them. They proudly display cases of peanut oil stacked neatly in their eating areas. They also display huge bags of potatoes and their place of origin. For a burger joint that proclaims the “best burgers available anywhere”, they spend a lot of effort on fries. When you pick up your order, the cup of fries is intentionally overflowing with an extra scoop that falls all over the burgers in your bag, so you feel that you have really gotten a good value.

They have other differentiators as well, but you get the idea. They find a target market that they can reach effectively who will recognize their USP and internalize it into a meaningful UVP^*.

What do you think? Is there a lesson here that you or other business owners can use in examining their value points? If you think going through exercises such as value mapping, SWOT analysis, or framing a USP to your current market conditions are academic drivel best left to a board room; you are missing out on a golden opportunity to not only increase sales, but to actually improve your business by orders of magnitude.

Has this started you thinking? Great! Let me know your thoughts…

--Bob

^{*Unique Value Proposition is how the customer internalizes a business’s value points into personally meaningful benefits. More on that in future discussions...}

© 2008 Best Business Associates LLC