Your store’s success comes from staying ahead of everything and steering your business toward what’s coming. That ability to know “what will happen” before the competition does is what defines the great companies — the ones that invest time in understanding what’s going on in the market, listening to their customers and their competitors, and, ultimately, figuring out why they sell and why they don’t.
Michael Porter points to 3 generic recipes for standing out in a competitive market:
- Being a cost leader: negotiating better, buying in greater volume, and running a business model that’s low on operating and capital costs.
- Differentiating yourself from the competition: easy to say, but usually much harder to put into practice.
- Focusing: serving the needs of a specific segment of consumers, so that competition decreases.
The first option is hard to pull off unless you’re a giant with the ability to supply product at low cost. Option 3 can always be on the table.
Many companies work on differentiation, and we’ll look at an 8-vector model to explain how to differentiate yourself in retail.
The reason your store succeeds with a differentiation strategy lies in excelling at one of these vectors far above the competition — and making sure consumers see it that way.
What can we do to change the customer’s perception and secure the company’s growth?
There are 4 strategic options in relation to your competitors:
- Compete on price by being the cheapest
- Achieve the widest product range
- Become the reference for the best service
- Work on the brand and the product to become an attractive destination.
The 8 value vectors
The positioning vectors should be expanded to 8; they indicate a company’s options for differentiating itself in the market with a proposition that is genuinely meaningful to the consumer.
The 8 vectors are an analytical model that lets retailers see where they stand relative to what’s being asked of them, and compare their performance against the competition.
It’s a prescriptive tool that helps identify market niches and growth opportunities: if there are niches to grow into within our market, it helps us spot them.
These 8 vectors are strategic fundamentals that support day-to-day decision-making. It’s important to stand out with a very high score on one of the vectors. It’s very hard to excel at all of them — just one or two.
Our consumer will keep assigning scores to each vector; these aren’t obvious or explicit, but they translate into concrete buying behaviors and into recommending our company to others.
Companies that don’t achieve excellent results when they enter the market are doomed to keep losing market share, sales, profitability… whereas those that stand out secure growth.
Of the 8 vectors, half refer to the product offering we have, and the other half revolve around the store we provide to our customers:
Product:
- Hottest: they have the most on-trend concept / product / brand.
- Cheapest: they have the best prices
- Biggest: they offer the widest product assortment.
- Newest: they refresh their product range more often.
Store:
- Easiest: they offer a more polished service
- Quickest: they offer faster service
- Cx-Est: they offer a more distinctive experience
- Omni-Est: the greatest omnichannel integration.
1- Being the market’s fashion reference — carrying brands and products that are on everyone’s lips and highly sought after, or having become a cool space to be in.
Brand – product – store: we have to work on all three to land in the consumer’s mind as the store that’s fashionable and a point of reference.
2- Being able to compete on price, aiming to be perceived by the consumer as offering the lowest price relative to the perceived benefit delivered.
This is the most objective vector, since it’s compared against other stores’ propositions. To the extent that our proposition is distinctly better than the competition’s, the price will be tied to a perceived benefit.
3- Competing on commercial offering, being the ones with the greatest quantity and variety of products. This matters to the consumer, who buys knowing our offering is broad within every category.
4- The ability to refresh our commercial offering, so that our customers perceive us as the reference store for spotting the latest trend.
These are companies whose supply chain is set up to be flexible enough to offer a broad, dynamic assortment, and that use their visual merchandising to be perceived as the ones who refresh the most.
5- As for the store factors, one area that could stand out is the service factor. Being seen as the ones with the team most focused on delivering an easier service for our customers.
We’ll need to think about a personalized customer-service protocol that translates into documentation and into training for all staff.
To supervise and keep the service from slipping, some companies use mystery shoppers, who can help us evaluate the service at the point of sale and for each employee.
6- The speed of in-store processes matters more and more, whether in a physical or virtual store. Our customer has less time to give us and needs transactions to happen as swiftly as possible.
Processes should be aligned so that our customers don’t have to wait at any stage of the purchase. In the online case, many sales are lost because the customer can’t browse quickly, or select and pay easily with just a few clicks.
Even so, checkout is where the bottleneck appears — queues to pay, or, online, systems that easily collapse when activity is high.
7- It’s increasingly important to compete on experiences so that customers feel the need to come to our stores. The venue needs to offer elements that turn it into a meeting point, a place to share unique brand experiences such as picking up, returning or trying out a product — all of which are part of the store experience.
8- Our customers demand total omnichannel, where the shopping experience is seamless across both physical and virtual channels.
As the customer moves through their journey, they may start contact with us through physical or online channels, and they won’t tolerate being treated differently just because it’s a store, a franchise, a multi-brand outlet, an authorized distributor or a digital channel.
Our brand image must be consistent and can’t be undermined by mismatches in prices or in the distribution chain.
All of these vectors are continuously assessed by our customers based on how we’re reaching the market.
Not all of them are equally important: half of them appeal more to the consumer’s mind — such as biggest, cheapest, quickest and *omni-*est — while the other four speak to the heart.
It’s the emotional vectors that will win a value plus and keep us from getting stuck in the fight among retail operators who dominate the rational side.