How competition can unleash the true power of your business
June 27, 2013
Building on topics explored in Breaking the Time Barrier, coauthor Donald Cowper looks at how to distinguish yourself in competitive landscapes.
Competition from commoditized service providers can be the worst—or best—thing that happens to your business. It’s all about how you respond. For a long while, a writer friend of mine, Cam, only saw the dark side of competition. During a low period last year, he rang me up to get my advice.
When we got together at a local bar the next week, our conversation went something like the following. Cam opened up by saying, “I think my time has come and gone.”
My heart broke. Although I hadn’t seen him in a couple of years, I’d known him for about two decades. He was a fantastic guy and a great writer who’d built a decent career writing for trade magazines and corporate newsletters.
When I asked him why he thought his career was dying, he told me he’d been suffering ever since the global meltdown. He’d lost a couple of his biggest clients at the time and then when he tried picking up new business, the world had changed on him. “Everything was different,” he said. “It was all about the Internet, web writing and blogs. And everyone I approached was telling me they could hire writers for pennies a word from content mills and job marketplaces.”
After a long pull on his drink, Cam added, “I used to charge a dollar or two a word. I don’t get how these guys can charge pennies—that’s ridiculous. I never thought writing could be commoditized.”
As someone who has spent a great deal of his career trading on his writing skills, I felt Cam’s pain. When I asked him how he was dealing with this new competitive environment, he said, “What can I do? I’ve had to lower my rates. And now I can hardly pay the bills.”
“Commoditization seems to hit everyone eventually,” I said. “Investment brokers, travel agents, web developers, graphic designers, nutritionists and so many more types of businesses have to contend with websites that offer inexpensive do-it-yourself services or kits, or marketplaces full of people competing to be the lowest bidder.”
“Commoditization is wiping people out,” Cam said. “It’s gotta stop, but I know it won’t.”
We talked about the forces spawning commoditization. How globalization was opening up marketplaces and encouraging the emergence of more and more providers offering the same or similar services—increasing competitive pressure. And how exploding technological innovation meant people could create efficiencies and automate services—expanding the ability to offer value at lower and lower costs.
At one point Cam added, “But these cheap writers aren’t offering any value.”
“Well, as much as we might not like it,” I said, “they are. They can satisfy the need for filler content or help clients with SEO. There’s a place for commoditization.”
“But it doesn’t seem like there’s a place for me now.”
The other path
I told Cam that in my work with freelancers and small business owners I’d seen two kinds of responses to competition and commoditization. One is to do what he was doing—trying to compete on price. Unless you’re trying to develop and offer commoditized versions of your service, competing on price leads to a dark and dismal place.
“What’s the other way?” Cam asked.
“Look for the kinds of problems you can help your clients with that aren’t—or couldn’t be—solved by the commodity providers. Usually that means working at a higher level, a more strategic level where judgment is involved. Take the travel business. You can book your own vacation with online services, but if you want to get off the beaten path or create a unique experience, you’ll need the help of an agent who can help you identify exactly what you want, and who has the expertise and valuable resources to deliver it. So, what’s the equivalent in your world? What can you bring to the table that can’t be DIY-ed, mass-produced or crowd sourced?”
“I guess that’s what I have to find out if I want to survive,” he said.
“You can do much more than survive,” I said. “Some of the most successful small business owners I know are people who have redefined themselves in the face of commoditization.”
We parted that night promising to touch base again soon. A couple of weeks later, Cam called me up, his voice brimming with enthusiasm.
“I’ve got it,” he said.
“My new business. I’ve spent the last couple of weeks deep diving into the whole issue of writing these days. I’ve been interviewing a bunch of clients and prospects, and digging into their pain points. With social media rivaling the power of search engines, being found is only half the battle for them. So companies don’t just need filler content optimized for search engines. They’re desperate for sharable content too. But a commodity provider isn’t really able to help there, because to create that kind of content you have to get inside the minds and hearts of the client’s customers. You have to know where they are hurting, and you have to have expertise in producing gripping content they’ll love. Stuff they’ll want to share with their network.”
Cam then described how he planned to reinvent his service beyond mere writing. He talked about a process for interviewing and surveying readers, about analyzing the results, developing personas and profiles and content guidelines.
The pricing hour
After I told Cam that I thought he was on the right track, I asked him how he was going to charge for that kind of service.
He admitted he hadn’t thought that all the way through. Charging by the word didn’t make sense if his services included all the upfront work. “I guess I’ll be charging by the hour.”
“You have to be careful about that,” I said. “The whole exercise you went through was to separate yourself from commodity providers. In a sense, when you charge by the hour you’re commoditizing your time. You’re just encouraging people to compare your hourly rate to someone else’s. But what you’re delivering to your clients isn’t your time. You’re delivering solutions that are going to have a huge impact on their business. This means you have the opportunity to charge fees based on the value you deliver, which would put an end to the threat of commodity providers once and for all.”
Cam had never considered charging based on the value he delivered and it wasn’t something he fully understood. So we ended up talking for a while about how he could do that.
A high level
I caught up with Cam a few months later at our local bar. Since our phone call, he’d thrown himself into his new business, developing new skills in how to create sharable content, becoming something of an expert. Even better, he’d found three clients who had been eager to invest in his services. He was now helping each of them develop a sharable content plan as well as creating the content for them. And he was charging them fees based on the value he delivered.
“I’m in a totally different place,” he said. “I’m working at a high level and my clients are already seeing great results. And nobody is comparing what I offer to a commoditized provider.”
Before we parted that night Cam added, “The irony is, there are some instances where I can use those commoditized writing services, so I subcontract work out to them.”
The big takeaway: if you are feeling the heat of commoditization in your industry, instead of trying to compete on price, like Cam first did, look for ways to distinguish yourself and your services. Consider the big pain points your clients have. Where do they need help most? How has the changing landscape affected your clients? What talents do you possess that you’re not tapping into? What skills could you develop to bring more value to your client relationships? And lastly, however you reshape or redefine yourself, make sure you charge for the value you deliver. If you’re interested in knowing more about how to charge what your services are really worth I refer you to the short book I recently coauthored on the topic, which you can read for free.
If you want to share some of your own experiences dealing with competition, please let us know in the comments section below, or shoot me an email at donald (@) freshbooks (dot) com.
Author’s note: this post is based on a business owner I have coached. I’ve changed his name and some telling details.