Tonight I began writing down some personal goals. Besides becoming a US Ambassador one day (one of my >10 year goals) one of my goals is to become a business and leadership guru in Vietnam. I think it would be fun. I'm passionate about leadership and business and enjoy it. Why not? Even if I don't get there, the journey will be a kick.
I decided to take some action towards this goal recently by agreeing to write a monthly column on strategy and leadership in a weekly business magazine called "Doanh Nhan." Here's the first article, to be translated into Vietnamese.
Focus on Value for Growth, Not on Price
Business managers in Vietnam often focus on price as the
key to success. I believe that this
nearly exclusive focus on price limits the growth and profitability of
businesses.
I know you're thinking "This guy is crazy. Of course businesses compete on
price!" And you're right -- price
is an important factor when customers make purchasing decisions. But consider what happens when business managers focus only on price to
compete. They spend all their time and
effort getting their costs down so they can lower their price to to the bare
minimum. And what do their competitors
do? They cut their price too. Both businesses start hitting each other with
lower prices in an effort to gain the upper hand. And the result? A never-ending price war that lowers revenue
and profitability. Both companies have
to cut product quality and service to keep from going out of business. That means poor or no service, low quality
materials, no staff training -- in short, low value products or services and
small companies.
There is a better way to beat your competitors while growing
revenue and large, sustainable profits.
I call it "focusing on value."
You can also think of "focus on value" as
"focus on solving the customer's problem." After all, why does any customer choose to
buy your product? It's because your
product solves a problem for them and they are willing to pay you to solve that
problem. Focusing on solving the
customer's problem leads to improvements in your product that will save the
customer time and money. When you save
the customer time and money, you make your product more valuable. If your product is more valuable, your price
can be higher than your competitors' prices and customers still will choose to
buy your product (but only if your sales people must know how to communicate
the value of your product, but that is the topic of another article!)
Let me give you an example from our business,
VietnamWorks.com. We help to solve a
problem common to every company in the world -- finding the people they need to
staff and grow their businesses. I'm
sure you can agree that the right person in a position creates a lot of value
for a company. On the other hand, the
wrong person in a position destroys value.
Our competitive strategy is very simple -- we focus on
solving our customers' recruiting problems better than our competitors. In our business, solving their problems
better means delivering many high-quality candidates, fast. When they receive more high-quality
applications they have more choice and are more likely to find the perfect
person for that new marketing, sales or IT position that is critical to
expanding the business and raising profits.
When we deliver the candidates faster we can get that perfect person
into the customer's company faster to begin adding value to the customer's
business. After all, time is money.
To ensure we can deliver value than our competitors, we
focus on marketing, staff training and product innovation. Marketing brings job seekers to our website,
staff training makes us more efficient and creative and product innovation
makes our website easier and more productive for customers. All this results in delivering more value to
our customers in the form of many high-quality applications.
In short, solving our customers' problem better and faster
than our competitors creates huge value for our customers. And we capture some of that value through our
pricing strategy. We do not offer the
lowest price. On the other hand, nearly
all of our competitors compete with us solely by offering a lower price. Some even give away job-posting services for
free. But they have been unsuccessful at
winning much market share because their products are less effective at
delivering candidates to customers.
After all, you get what you pay for.
If
you are looking for ways to grow revenue and profitability in your business,
you might consider spending some time to understand your customers' problems better. What do they value? Faster delivery times? More flexible service? A specialized product or service no one else
is delivering? After you understand
their needs better, you can change your product to increase the value you
provide to them. If your customers
understand the higher value of your product they'll be willing to pay a higher
price for it. Imagine that -- increasing
revenue and beating competitors by increasing your price! It's more realistic than you think.
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