Don't be a commodity

If you asked me whether I prefer to shop at a small, locally-owned and operated store or a large chain/box store - I would tell you that I prefer the small store, but the truth of the matter is that I shop at a number of chain stores all the time, places like: Home Depot, Costco, Stop & Shop, Dunkin Donuts, Target, Macy's.

Some of what's sold at those larger stores don't have alternatives in small locally run stores. Some do but are much pricier in smaller stores or don't have the same selection.

The interesting thing is that in my own experience sometimes we are willing to accept a limited selection or higher prices and sometimes we aren't.

Take food for example - by the end of the day we need to have put a certain number of calories into our body to make it to the next one. For any given meal, there's a lot of options for how we do that - All the way from McDonald's and Subway to Locke-Ober and Grill 23 & Bar - where we go depends a lot on what we're looking for. If we just want to put some food in our belly, we don't really care where we end up, we just want something decent, quick and cheap. If we're not just looking for food but for an "experience" the sky's the limit for how far we'll go for a bite for how much we're willing to pay. Are we really that much better off in a physical sense at the end of the day paying 20x as much for a couple thousand calories? Of course not, but there's obviously more to eating than just satisfying a physical need.

The same can be said for just about any other product or service. If all we're looking for is the end result - let's take a specific model of Refrigerator in this example - then what we will do is scour around for the best price and delivery options and use those as the guidelines for where to make our purchase. However, if we're looking for more than just a specific fridge - if instead you're looking for someone to help you decide which fridge to buy - suddenly where you go to buy your product matters because of the specific knowledge of the person you end up talking to. In our case when we went to Best Buy to ask a couple of questions about appliances we quickly realized that the person trying to help us (after we waited 10 minutes to successfully flag someone down) knew less than we did.

The contrast couldn't have been more visible when we later went to Yale Appliance and had someone help us decide what to buy. Yes - what we ended up buying was a commodity - but the process to get there highlighted how a company can add value in their approach to the business which people are willing to pay for.

Great businesses have the ability to turn commodities into experiences with the way they treat their customers. These great businesses aren't always small locally run businesses - sometimes there are franchises that people love to go to because of the people that work there - but many times it seems that the type of people that are engaged and motivated in what they are doing end up at smaller businesses because of the more positive culture that seems to permeate the good ones. There's a company in the book Small Giants that is in the Records Storing business - CitiStorage Inc - that manages to do just that for a business sector that's almost the definition of a commodity service industry. Yes, they do have to compete somewhat on price, but what makes them great has more to do with their business atmosphere and methodology than the price tag that they offer.

All those larger stores that I go to: Target, Home Depot, Costco, etc sell commodities and nothing else. If I can find the same product somewhere else for less - they've lost me as customer. So their only options are to compete on price and try to lower their cost of doing business. This usually results in removing perks and employees that cost too much (usually the good ones) - further pushing the store into commodity-land.

The alternative is to embrace the things that make your operation less of a commodity - the differences in how you run your company and the employees that are great at their job (and who probably cost you a little more) - and suddenly you don't have to compete just on price. You're customers will come back to you because of the value that you add - the particular things that make your company unique.

If you're a Web Developer and all you're doing is trying to compete on price, there's a whole bunch of people overseas who are going to beat you at that game. However, if you are can differentiate yourself - be it by you reputation, service, responsiveness or skill set you'll be able to charge a lot more for what you do and be a lot better at it.