Article originally published in the Silicon Valley Business Journal on October 24, 2016
There is one universal principle that determines the success of all businesses: Be the preferred provider to your markets.
What is a “preferred provider?” It’s a provider that a customer or client favors in the purchase of a product or service versus its competition. A preferred provider has a significant competitive advantage over all other providers, because it is the “go-to” provider in the marketplace.
Whether a business sells autos, groceries, clothing, computers or raw materials to a manufacturer of industrial products, it wants to be the preferred provider of its products.
Whether a business is an Internet service provider, a hospital or a physician in a group or individual practice, an attorney or a roofing company, it wants to be the preferred provider of its services.
So, how does a business build competitive advantage by becoming the preferred provider to the markets it serves? It differentiates itself from competitors by excelling in the following six areas to achieve preferred provider status.
1. Offers high-quality, reliable products and services
When customers buy a product, they expect that it meets a high standard of quality and it will work as intended. They don’t want to waste time and effort returning a shoddy product to have it replaced.
When clients buy a service, they expect that service to be performed in a professional and competent manner.
2. Provides a great customer experience
People will return to buy products and services from those companies that always meet their commitments. Companies earn repeat business when the price charged is fair for the value received, and when they make it easy for a consumer to interact with them.
Customer service representatives that only go through the motions without taking a genuine interest in helping a customer drives repeat business away and hurts the company’s reputation.
3. Delights the customer
On Aug. 22, I wrote an article headlined, “Here’s how to create a sustainable competitive advantage,” in which I described how Cooper Roofing Co. provided rapid service to a friend whose kitchen skylight broke just hours before it was forecasted to rain. Within an hour, a Cooper crew arrived at her home and covered the skylight opening with plywood.
My friend was delighted by how quickly and professionally Cooper Roofing responded to her problem. Now, don’t you think that she will be singing the praises of Cooper Roofing to all her friends?
4. Is trustworthy
Customers want to do business with a company that will act in the customer’s best interest. When a company acts in this manner, it earns their customers’ trust. When a company acts in its own best interest and against the interests of its customers, it earns the wrath of its customers.
The ongoing scandal at Wells Fargo Bank has damaged the trust that current and potential future customers have in the bank.
California has announced that it will suspend Wells Fargo from participating in the state’s investment activities, followed by similar announcement by Illinois and Ohio, as well as Chicago and Seattle. More states as well as cities will follow, not to mention the loss of business from individuals and commercial accounts. Wells Fargo will pay a significant price for losing the trust of its customers.
5. Isn’t arrogant
A provider may feel that since it has a monopoly, it can arrogantly charge whatever it wants to for its product. The CEO of Mylan Pharmaceuticals and the former CEO of Turing Pharmaceuticals found themselves skewered in front of Congressional committees for showing arrogance and disregard for their customers in the pricing of their medications.
If an industrial or commercial customer feels that the price being charged is unreasonable, they often will go to the ends of the earth to find a replacement, even encouraging other providers to enter the market.
Providers that don’t exploit their monopoly position have a higher chance of remaining the sole provider to the market and enjoy higher sales revenues and profitability over the long term.
6. Is on a journey to be the best in the world at what it does
Why should you be on this journey? Because it builds competitive advantage and makes it more difficult for other companies to compete with you. This also focuses employees on what builds great, enduring companies.
You want to be so good at being the preferred provider, you want your competitors to think it’s very difficult to compete against you. That’s how good you want to be.
Stan Silverman is the former president and CEO of PQ Corp. He also is founder and CEO of Silverman Leadership and is vice chairman of the board of trustees of Drexel University. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.