In my blog post "What Is Your Business Strategy?" I mentioned that there are three basic elements of business: price, service and quality. In my experience businesses that succeed compete well in two of the three categories. You may be wondering, "Shouldn't successful businesses compete on all three?" While I think that would be great, it's often not economically sustainable to try and have the lowest pricing and high quality and amazing service.
How this works
One of the communities I worked at was ultra high-end luxury apartments with stunning ocean views in a very affluent area. When I started at the community we offered great service (we had a lot of staff on-site to cater to our residents) but we were undergoing a massive renovation at the time which meant that the majority of our amenities (a huge reason to rent there) were not able to be used for a while and we were doing renovation work in our apartments as well.
All of this work affected the quality of what we offered to our residents and made our community less attractive to potential renters and to our current residents. We marketed this community as ultra-luxury but that was not the reality of the experience during this season. However we did NOT compensate for the temporary drop in quality with a decrease in our overall pricing strategy. There was a disconnect between what we offered and what we delivered. We were only competing in one of the three main areas and we suffered until we made some pricing changes to get us through the renovation season. Once the renovations were done the community was amazing and performance continued to improve.
I worked at another community that had a lower quality product (it was just older) so we offered great service and we had competitive pricing. We didn't want to be the cheapest (as that wasn't the customer we were chasing) or the most expensive in the market, especially considering how our older community stacked up with the A-product in our submarket, so our pricing was down the middle, but still very competitive for what we offered, while still generating a nice profit. We actually tried doing extensive renovations (upping the quality) in select units and the ROI didn't make sense for market conditions. So we backed off that initiative and did a smaller scale refresh. That was far more successful.
We didn't try to advertise our community as "luxury." There were no fancy French words used in our marketing materials. There was no concierge in the office. We knew who we were and what we offered (great value, great people, great location!) and that is why we were consistently profitable.
What does mean for you?
- Identify where you compete! Is it pricing and service? Service and quality? Quality and pricing?
- Examine if what you're selling matches what you actually have. Are you advertising "champagne wishes and caviar dreams" when you really have light beer on tap?
- Resolve to be the best in the areas you're competing in. If you're selling quality, does the carpet you're putting in scream quality? If you brag about great customer service are you really offering great customer service?
- Does the rent you want to charge match the product you're offering?
- Use vocabulary that matches your strategy.
I know there is so much more that can be said about business strategy-but I hope this gives you and your teams food for thought as you reflect on 2018 and plan for 2019!