It works like this: Several established HVACR companies enjoy the healthy competition in a market. Everyone’s serving their customers, and all is well. Then, one of those companies, or perhaps a young startup company that wants to gain rapid market share, swoops in and offers an amazing discount.

Suddenly, everyone sits up and takes notice, or they realize that their customers are leaving their company and going to the discount company. So, those established competitors try to offer a slightly better discount.

And then a slightly better one.

And then a slightly better one.

So, it continues until each company becomes focused on slicing costs and squeezing their payroll and their vendors in order to afford to offer the most aggressive discounts in the market.

It’s a race to the bottom because you can only go so low until you run out of money.

Unfortunately, I see it happening too often in the HVACR industry.

But most owners reading this will ask, “What other choice do we have? Our competitors are stealing our customers with their rock-bottom prices. If we want those customers back, we need to offer even bigger discounts.”

And I always respond by asking, “Are disloyal, discount-seeking customers the customers you want to have for your business?”

If you want to compete against aggressive discounters in your market, the best way is to not get involved in that race to the bottom at all. Instead, do these four things:

1. Attract a better customer — Create an “avatar” (that’s a marketing term for a description of your very best customer that you wish all your customers were like). And if you don’t want a disloyal, discount-seeking customer, then don’t make that your avatar.

Instead, create an avatar of a highly loyal, price-insensitive customer who loves your company. You may need to change things about your offer or even your company. Then figure out how to market to this avatar: Where do they live? Where do they work? What hobbies do they have? Figure out who your best customer is.

2. Build a better brand — Many companies have to discount because it’s the only way they’ll get the attention of the customer. But a strong brand gets noticed and remembered — customers will think of you when they need your service. Think about who your avatar is and what they’d respond to when it comes to a brand. Then, build a brand like that.

3. Build a better team — Your team is the face of your brand. Your customers will only think as highly of your brand as they think of your team.

Does your team work well with the avatar you’ve identified? Do they represent your brand accurately and professionally?

If not, you might need to rethink their role in your company. And you may have to invest a little more into the right team members. However, this is an investment that is worthwhile because it ensures your customers will remember your brand.

4. Build better value — Those competing discounters are shaving away value to create a barebones offer for next to nothing. Go in the other direction. Stack value. Make sure every offer is a no-brainer choice for your customers. And don’t just think about offer-specific value; think long-term value. Consider how you can add value to your customers long after you have finished the job. Is anyone else sending them birthday cards, a magazine subscription, or cookies throughout the year? Probably not. The right customers will love that long-term value and will remain loyal in the face of desperate discounts.

SUMMARY

Nearly every market has competitors, and those competitors fight with each other for customers. There’s nothing wrong with healthy competition. But, it becomes unhealthy for the businesses when they enter a race to the bottom by trying to out-discount each other in an effort to win customers.

Let your competitors lose money and hurt themselves and each other. While they are zigging, you should zag in the opposite direction — start providing better service to a better customer with a stronger brand and team.

Publication date: 4/2/2018

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