Small Business Development Center
At Chemeketa Center for Business & Industry
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Monthly Archives: September 2012

Use Product Differentiation as a Competitive Advantage

By Chemeketa SBDC

As a business advisor, I routinely ask my clients “What sets you apart from your competition?” and “What is your competitive advantage?”  I frequently receive the answer “I charge less than my competition.” That always
raises red flags for me, and I worry about this business owner getting thinner
and thinner margins and needing to get ready to post the “going out of business” sign.

Gone are the days of the company store. Even in a small town, all businesses are in a global market with hundreds if not thousands of competitors. With so much competition, there are only two ways for businesses to compete: price and differentiation. Small businesses cannot compete on price with the large box stores, larger department stores or the Internet. The only way for small business to compete is on differentiation.

So what does that mean exactly? Product differentiation can be as simple as creative packaging or as elaborate as incorporating new functional features in a product. Sometimes differentiation does not involve changing the product at all, but instead it’s about creating a new advertising campaign or other sales promotions to highlight differences between one provider and another.

Differentiation strives to make a product or service more attractive by contrasting its unique qualities with other competing products. Successful product differentiation creates a competitive advantage for the seller as customers view these products as unique or superior. And that’s what the business owner wants the customer to focus on, not the price.

What sets you apart from everyone else? Here are some examples that may apply to you: proprietary know-how, intellectual property, your reputation and your brand’s equity, your high level of customer service, your convenient location, a speedy turn-around time, etc. And this is only a small sample.

Take some time to determine what your point of differentiation is and then build a marketing campaign around it. And for goodness sakes, stop talking about how your prices compare to everyone else’s.

Marcia Bagnall is Director of the Chemeketa Small Business Development Center and instructor of Small Business Management Program. The Small-Business Adviser column is produced by the center and appears each
Sunday. Questions can be submitted to SBDC@chemeketa.edu. Visit the SBDC at 626 High Street NE. in downtown Salem or call (503) 399-5088.


Getting Cutomers to Pay You and Continue Coming Back

By Chemeketa SBDC

Times still are tough out there for most business owners and their customers. You may have customers who never had problems paying you in the past, but who have developed slow-pay habits over the past couple of years, or worse, stopped paying you altogether. How can you help these formerly good payers continue to pay you?

If you don’t already offer payment plans, then you should consider it. Sometimes this is the only way you’ll get paid at all, although it will take longer. You want to keep your customers, so make it possible (and comfortable) for them to pay you, even in small amounts.

The first thing to consider is how you are going to approach a slow-paying or non-paying customer. Being polite, reasonable and fair is a good start. No one likes to be yelled at or intimidated, and taking a strong “take no prisoners” stance will just lead to your customers hiding from you, avoiding phone calls, and stalling.

Have a conversation with your customer that begins with asking questions about what’s going on with them. You will learn why they aren’t paying you, and what might be reasonable for them going forward. After this discovery process, make a clear request for specific amounts at specific times. Don’t make the mistake of asking the customer how much he can pay, keep control
of the conversation. Agree on a payment plan together.

Follow up the conversation with a letter that details the arrangement. You can start with a sentence like “Here’s a recap of our conversation today (date) regarding the (specific dollar amount) still owed from the previous (specific time period).

Then detail the terms agreed on, the number of payments and their dates, and any other details. Be very clear about everything, and include a stamped payment envelope for extra emphasis. Be sure to include a sentence or two about how much you appreciate this customer working to make this debt good, and how you look forward to working with them in the future.

Marcia Bagnall is Director of the Chemeketa Small Business Development Center and instructor of Small Business Management Program. The Small-Business Adviser column is produced by the center and appears each
Sunday. Questions can be submitted to SBDC@chemeketa.edu. Visit the SBDC at 626 High Street NE. in downtown Salem or call (503) 399-5088.