Choose Your Own Terms

On Saturday my wife and I had gone out for dinner. While we were enjoying our appetizer, I overheard the man in the next booth say, “Albertsons is closing and I’ll tell you why: Walmart ran them out of business.” My first thought was that he was wrong, and I wanted to tell him so. But I made a better choice by letting it pass in favor of my date.

Since people will be people, it is possible that some Walmart managers, overcome by machismo, would agree with the gentleman. But I still think he was wrong. My position is not to defend Walmart — in spite of the fact that I love success stories (and they are one) — but to see their competitiveness from a broader perspective that can be instructive for all of us who are involved with different businesses.

The first reason that the gentleman was wrong is because managers for each company choose the terms on which they want their businesses to compete. There are, no doubt, other grocery chains that chose to compete with Albertsons on terms that favored Albertsons. Some of those that did probably lost, and someone declared that Albertsons ran them out of business. That, too, would be an incorrect statement. Any mistakes or faults or blame that may need to be ascribed should be on the management that chose to compete on terms that favored their competitor.

It could be claimed that the more powerful business moved into the market that had been served well by smaller or independent companies. That is true. But it is also true that the businesses that were in the market first have the opportunity to change the terms of competition. The fact that they may instead choose to attempt a re-enactment of David’s triumph over Goliath is a management decision based on something other than an objective assessment of the environment.

A friend of mine owns an independent pharmacy. It is a single-location neighborhood pharmacy. One of those places where everybody knows your name. About 15 years ago, Walmart put a supercenter just around the corner. My friend fought it but he also did something else. Being smart enough to know that he couldn’t compete on price, he didn’t. He changed the terms of the competition.

He grew his closed-door pharmacy business. That is a type of business where a retailer can’t compete, and now he compounds drugs for pain management, chemotherapy, nursing homes, anti-aging and just about anything else. That way his business is not dependent on winning a war against Walmart. Sure, he still has his retail pharmacy, but the terms of the competition are not based on the $4 retail customer.

Sometimes, however, there is not a different product line to focus on like my pharmacist friend did. So if HME companies have to compete in the same product line, how can you change the terms of the competition? There are a lot of ways that can be found if you apply creative thinking.

One is to break down the components of supplying the product. This involves employees, processes, customers and outcomes. Once the components are detailed, your managers can identify the new terms on which to compete. In the past, managers have selected things like faster delivery and claims about quality of care as the term of competition.

Another possibility is to consider diseases and disease states and set the terms of competition on a related aspect. This could also be called a “niche.”

A final category to think through involves the four “Ps” of marketing: Product, Price, Place and Promotion. Promotion could be in a different medium. Product could have different services attached. Place could focus on different geography, diseases or disease states. Price is the last place companies should try to compete although, more and more, it is becoming a part of this industry.

Whatever you choose as the term of competition should meet two requirements. First, it must be something your customer cares about. (You might have to educate the customer on why he or she should care about it.) Second, it must be provable. That means there must be a way to measure it. Simply saying you offer the best quality care, for example, is not provable. However, if quality is defined and measured, it could become provable.

Once the terms of competition have been selected, your marketing, and maybe even your business plan, should be adjusted accordingly.

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Wallace Weeks is founder and president of Weeks Group Inc., a Melbourne, Fla.-based strategy consulting firm. You can reach him at 321/752-4514 or [email protected].