Whether you’re starting or promoting a business, there are typically three fronts on which you can compete – service, quality, and price. These are the three main cornerstones of competition for busineses, and the basis that we as consumers base our decisions upon. While it’s possible that you can differentiate your services or products base on two out of the three attributes… you can’t compete on all three. The reason you can’t compete on all fronts is because when combined, these characteristics are contradictory of each other. Trying to focus on all three will leave gaps and weak spots and a business model that can’t be sustained.
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Quality
Differentiating your products or services based on quality is a great model to build a business around. When you produce quality products, you are able to charge more to your customers because they understand (hopefully) that quality comes at a premium price. Even if you can only compete on quality, you are building a reliable and sustainable model.
Benefits of competing on quality
- You can charge more for your products or services
- Your products will stand up against those of inferior quality
- Quality is difficult to replicate (creates a higher barrier to entry)
- Often, your profit margins can be much greater
Disadvantages of competing on quality
- Can be more time consuming
- Volume will be lower
When you are differentiating your company or products based on quality, you are creating a business model that is more difficult to replicate than that of something that competes based on price. Quality takes a longer time to build, uses better materials and services, requires more resources, and has fewer customers. However, the main benefit with differentiation based on quality, is your ability to charge a premium and have larger profit margins in the marketplace.
You can have Quality+Service, but not Quality+Price
With quality you are able to effectively offer first-class customer service. Quality and service go hand-in-hand and (if you’re able to do both) can offer you a tremendous advantage over the competition. This is especially true in markets where competition is fierce. You have healthy profit margins, thus you are able to put money into providing excellent service.
However, you cannot compete on quality and price. You cannot have the best product and have the best price. These two characteristics are polar opposites of each other and create a business model that is unsustainable. If you have low prices, you cannot have the margins or revenue that you need to create quality products. Trying to compete on these two aspects is a model that can’t work. It’s like buying a Ferrari at a Mazda price (although that would be great, the math doesn’t add up).
Examples
There are many successful companies that compete on quality, or quality & service:
- Apple
- Mercedes, BMW, Ferrari, Bentley, etc.
- Rolex
- Virgin Air
You will notice that the companies above charge a premium for their products and are not the lowest price in their categories or industries. They have chosen to cater to the consumers who value and are willing to pay for excellent products. You can be very successful when competing on the aspect of quality.
Should you compete on quality?
You need to decide which area you would like to differentiate yourself (price, quality, or service) and continually reinforce that position in customers’ minds. When you compete on quality, it’s your job to make your customers (and potential customers) understand that you are the right choice because you are offering the best product available.
One more thing: If you are not the best quality product out there, try to compete on price or service instead. If you try to fake it and compete on quality, your marketing message will be extremely ineffective because your customers already have made up their mind what you offer. If Saturn started tellling us they made better cars than Bentley, not one of us is going to believe them. Your job is to reinforce or adapt to your customers’ perception of you or build an awareness that fits naturally with what you offer – price, quality, or service.
