In the past few weeks I have seen a number of posts on Twitter, Facebook, Google + and an American Express TV commercial urging people to “Shop Small” and support the local community. The obvious interpretation of the Shop Small campaign is it represents an attempt to get shoppers to make stronger emotional connections with their local shops. However Shop Small is also a smart way of communicating to potential customers an additional source of value. There is a lesson for any business that believes they have to compete on price because all the products or competitors are the same — communicate value.
Conventional wisdom says small local shops can’t compete with large national chains. Certainly it can be very difficult for small entities to compete in the area of cost-to-serve. They buy smaller amounts than the large national businesses and their supply chains tend to be less efficient. That results in a higher average cost per item to the small business. Similarly, spreading the costs of computer systems, accounting, legal and other overhead expenses over the products sold typically results in higher overhead per unit for small businesses. If the small business tries to compete with equal or lower prices than larger firms, profitability can be low or non-existent. So, small businesses have to compete on value, not price.
The Shop Small campaign helps small businesses identify a source of value for customers. Most small businesses already emphasize their ability to provide personalized customer service as a source of value, and customers pretty consistently demonstrate they prefer personalized service. Much like the lyrics in the theme song from Cheers – “You want to go where everybody knows your name.” In addition to that, Shop Small is emphasizing the value of strong, vibrant communities. Strong local businesses can provide much needed community support in areas like the arts, libraries, local sports, summer jobs for teenagers, senior services, etc. All of those things make community life richer, and towns have a better feel when shops are full. That might not be the first thing that comes to a customer’s mind when deciding where to shop, but when you can explain how strong local businesses benefit the customers and the community, customers understand. When you can help customers understand there is value in having a more vibrant community and profitable local businesses are part of that, customers will often be willing to pay a little more.
The lesson for all companies, large and small, is you have to identify and communicate all the sources of value you bring to customers. Whether it is a wider assortment of products, greater technical support, door-to-door service, telephones that are answered on the first ring, mobile apps that bring efficiency to the customers, or sales teams that offer solutions to your customers’ problems, explain everything that adds value to your customers. While price is a part of every customer buying decision, other areas are usually more important. Don’t expect your customers to figure out all those areas on their own. Like the Shop Small campaign, explain it to them.