Amazon Cannot Compete with Experiences
Have you noticed that the number of show rooming customers is increasing? If you haven’t, then you are ignoring a harsh new reality for retail stores. More people now visit physical shops to feel the products then go online to buy it for rock bottom prices.
This is affecting many businesses – gullible managers have chosen to lower their prices to compete with their online counterparts.The sad truth is that you can’t win. Your business will end up in a commoditization trap. Which means you have to reduce your profit margins even more in order to keep your customer base.Do you want your customers to view your products as commodities that they can get anywhere? Of course, you don’t. Your brand needs to stand out and not blend in with the cheapest options.
Today, we live in a global village where technologies that used to be sophisticated and out of reach are now ordinary.
Commoditization is so widespread that no industry is safe anymore. Take for example, industry disrupting companies like IBM and Hewlett-Packard that once offered top of the line technologies that now cannot be distinguished from their cheaper competitors.Commoditization is the result of globalization, ideally, businesses have no choice, right? Yes, they do. It is easier for managers to blame outside forces for slow sales than to actually look inward for solutions.The cheap Chinese suppliers are not going to start valuing their products more: No, prices are only going to get cheaper and cheaper. So, if the only tool in your arsenal is to compete by lowering prices by 30% to 60%, then you may as well give up. It’s a lost cause.
No matter what you are selling, it is guaranteed that there is an oversupply which leads to lower perceived value by customers. The simple trick is don’t compare yourselves with the cheaper options. One major company that is proving that cheaper is not better is Amazon’s web services (AWS).Yes, this is confusing because Amazon.Inc is the leader of the price wars but when it came to cloud computing, they set themselves apart.Cloud computing has become very popular because Tech individuals and companies want to scale up their operations. But it costs a lot of money and the infrastructures needed is massive.Other competitors like Microsoft Azure and Google cloud are cheaper when compared to AWS, but in reality, Amazon is winning. Some of the tactics that AWS is using that you too can implement are:
1) Amazon got there first: there is nothing that can replace innovation the business world. Your ability to understand that over time people’s values and needs changes are crucial. You cannot continue to offer the same products and services you did 10 years ago and expect to see growth. Innovating does not mean changing your business-like Nokia did, but you must strive to adapt.
2) Packaging: this simply means bundling your products and service. This is the marketing strategy amazon uses every time and it works. You don’t have to sell everything – all you need is package your products together as a single purchase. Sell the customer top quality related products and services and their perception of your brand will change.
3) Brand power: customers should be able to tell the difference between your products and the others. Some managers still think that ideas like store brand cereals killed branding and that people no longer care about brand names. That is not true. The average person may not care about the brand but those who have the greater buying power do. So, make your brand speak to the customers who have more money to spend.
Another industry disrupting company that did not bow to commoditization pressure is Apple. Over the last decade, cell phones have become so cheap but the price of an iPhone continues to rise.Competitors like Samsung have tried their best but the iPhone is still superior. How is apple achieving this? First, they innovated, then they built a cult-like consumer following, then they make sure to offer the best possible customer service.
Innovation started apple, customer service and brand identity have kept the company strong.
Too many businesses ignore one of the single most important aspects of gaining and keeping buyers, it is customer service. Simple but true. A clear example is Jive communication. The telecom industry is known for bad customer service, but Jive stands out.The company offers businesses a cloud-based phone system. There are many other companies that do this but industry experts can testify to the amazing experience Jive offers.One of Jive’s most notable features are its 15 second hold time and its all-inclusive pricing. Which means customers do not go through the dreaded long waits to contact support and they don’t need to bother about how much the phone bills cost.
These companies are not engaging in price wars, they are setting the lead.
Showrooming may be here to stay but the internet has one major weakness and that is the lack of customer experience.People don’t just want to buy stuff, they also crave an experience. That is why malls succeed. The experience is what customers will remember the most about your business.The shopping experience of customers can greatly be enhanced to bring in more shoppers and make a difference.The little secret is to be just a little better than your competitors. Do just a little bit better than your competitors all the time and you have a winning formula. Sure, some mistakes here and there can be ignored but the secret is consistency.
Here are 3 of the most effective ways retailers can use to increase customer experience.
Pay Attention to Employee engagement:
The first contact of your customers are your employees, always make sure they share the vision of the company. No matter how much you spend on advertising, it would not compare to the customer experience that your employees can offer your buyers . Share the vision with your employees, involve them with the management and set an example for them to follow.Train your employees to treat the customer like the center of the universe. Then the products will become a souvenir of the shopping experience.
Don’t make customers struggle:
From the placement of your products to the pricing details, it should be easy all the way. NirEyal in his book “Hooked” points out that one of the reasons most tech companies are so successful is they make the buying process very easy.Don’t bug your customers with details. Make sure your most profitable products are within reach and the payment process is super easy. Also, ensure staff members are available to make this process go smoothly.
Engage the Emotions:
We are emotional beings – how we feel affects the decisions we make and that includes our shopping habits. Designing your store to be visually appealing and the ease of movement is necessary.Also, Research shows that background music has a major impact on how people spend money in a store. Be careful the type of music you play in the background though, you don’t want your customers to fall asleep. Clothing stores can get away with almost any kind of music but the best option for other stores is slow tempo.
The smell of your store can also add uniqueness to your brand. Customers will not come into your store because of the smell unless it’s a bakery: but good smells like lavender calms the senses. People will feel relaxed and they will be eager to repeat the experience.While customer experience will boost shopper loyalty, your brand perception depends on your product catalog.The number of products you offer will determine how people view your business and your growth potentials. The “less is more” concept is true – you can grow faster and maintain your growth.Think about what your customers’ needs are. Focus on solving those problems and don’t offer them unnecessary services. If you offer too many products, people will perceive your business as cheap.
The best part is that by offering “fewer, better” products, you will increase your profit margin. People are willing to pay more for experts who offer them specialty services or products.Specialty is the reason why surgeons earn more than family doctors. And also, the rationale behind scented soap stores who charge ridiculous prices, but their customers care less.The commoditization problem is not going away anytime soon: instead of slashing prices, try different experiments and observe the impact. For example, you could try putting your cheapest products on sale for a short time. It will attract some buyers but they will not be loyal.
Warning.having sales too frequently will make people avoid buying normal prized items and just wait for the sales.And, offering sales on your most expensive items will drive away your well-paying clients because they will feel cheated.Another experiment that you could try is adding other categories to your list of products or services.This is not a good option for small business but once you have scaled up to a certain level then you can try this. The other categories should complement your current one. For example, Nestle is branching out into nutritional products and this goes well with their basic food category.
Avoiding the commoditization trap will not be easy for most businesses, but it is the only way. Don’t compare, don’t compete, just avoid it.