Strategies to Compete with a Mature Business

On Quora I was asked:

What are some strategies to compete with a mature but inferior product with a strong customer base?

Hypothetical situation: You have a neighborhood with a local coffee shop. The coffee shop has been there for years and has happy customers and makes good revenue. They have tuned their business well for the area and they know which pastries to offer and what time to open in the morning, etc. You see, however, that it is somewhat run down. The coffee isn’t that great. You are pretty sure you could build a better coffee shop.”

This was my answer:

I find taking customers from a mature company to be quite simple.  It doesn’t really take much to do it as well.

I suppose I can play upon your hypothetical situation.

Having a better product isn’t all you need to outshine another business.  It’s just one of the factors.  In today’s day and age, people tend to buy from socially responsible companies that provide amazing customer service.

This is how I would approach the scenario.

They have a run down shop.  Sure, some people enjoy that type of vibe.

What I would do is create a competing shop in the same general area, since location is key.  I would go with a homey and comfortable look and feel to the coffee shop.  Something very approachable and very friendly.  A place that you could consider to be your home away from home.  Maybe use circle tables instead of square tables, so people can see it as a more friendly environment to converse.  A few sofas could help as well, for the people who just want to get away to somewhere and relax.  The help of an interior designer can cultivate this look and feel for you.

From there, the next major factor I would have to consider is my staff.  I would need to find the happiest, friendliest baristas and wait staff that I could.  People who strive at excelling in customer service.  The type of people you want to know on a first name basis, because they bring a smile to your day.  If you can’t afford to hire people, then you may as well be in the front of the business to be that person.  People go back to places that appreciate them.

Want even more of a competitive edge?  With how socially responsible our consumers are becoming, use recycled materials for everything, from your cups to your trays.  Explicitly state out in your branding that you are a socially conscious company.

Want to take it even further?

Be a company that society wants to exist.

Take x% of earnings and invest it into the community, or into socially responsible projects.

Now comes product pricing.  We have two choices here.  We can either charge the same amount that the place across the street is charging, or we can increase our costs by 50 cents to a dollar.  Either way, you’ll earn more business.  I’d go with increasing pricing by a dollar, but that is completely up to you.  Also, implement maybe one or two signature items that people will only be able to find at your venue.  Maybe a signature recipe to a cake that was passed down from your grandmother or relative.

Have readily available menus on hand with your phone number and address printed clearly on them.  Offer a discount on volume orders, such as catering or for big parties.

If you’re in a densely populated area, then a delivery service within a 3-4 block radius would be a good idea as well.  Maybe use a dishwasher who isn’t washing dishes to do the deliveries by bicycle.  Make sure they drop off a menu with the order.

Now, your foundation is set.  What we have to work on hence is advertising and marketing.  Personally, this is what I would do.  I would have a few solicitors give out free coupons in the area for their first cup of coffee at your venue for free.  Maybe do that for half a month, so people can come in and experience your new venue.  Try to target the competitor’s clientele.  Allow them the opportunity to see that the quality and atmosphere is much better at your location.

From there, I would focus on social media marketing, with a heavy focus on location based services, such as Yelp and Google places.  Make sure you heavily optimize the SEO on your business, so people who search for coffee shops in your area can see that your destination is the place to be.  Maybe put out a promotion where people get a free bagel with a genuine five star review on Yelp or another social media site.  Advertise a bit on Yelp and other social networks.  Offer a discount for first time customers who visit your venue.  Offer a loyalty program for people who come back.  Maybe base it off of check ins on Facebook, Yelp, Foursquare, or another location based application, so their network will be able to see your venue as well.

Reach out to your local newspaper and Chamber of Commerce. Inform them that you want to do an interview about the launch of your business.  Have them write an article about this new socially responsible coffee shop built by you.  Have a backstory on why you wanted to get into the coffee industry and back it with a story of yourself and your vision on how you want to contribute back to the world, or at least your local community.

I’d highly recommend visiting Koreatown Los Angeles and visiting a few cafes in this area.  Our coffee shops charge approximately $5.95-$7.95 for a drink, at a high premium compared to places like Starbucks, yet their tables are usually filled all the time with loyal consumers who keep coming back for more.

Originally posted on Quora.

Leonard Kim is Managing Partner at InfluenceTree. At InfluenceTree, Leonard and his team teach you how to build your (personal or business) brand, get featured in publications and growth hack your social media following.

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