Making customers into supporters, February 2, 2007, 7C.

Companies without customers are doomed to failure.  Organizations exist to engage in ongoing and profitable exchanges with external others.  Without profitable exchanges, costs will exceed revenues and the venture will yield negative returns.  Eventually, those responsible for running the firm will choose to invest their time, talents, and resources in other opportunities that provide greater returns.  Without ongoing and profitable exchanges, businesses will go out of business.

How do firms attract customers and supporters?  They offer products and services that satisfy customer needs, sell their offerings to customers at prices that maximize profit (that is, low enough to attract customers and high enough to provide a healthy return on investment), and provide their offerings in the places expected and required by customers.  They also must make customers aware of their offerings and promote the desire in them to seek out and make exchanges with the firm.

When products or services are highly demanded by customers, firms with monopolies on the offerings reap big rewards—because they have more control over supply and prices than firms in competitive situations.  In competitive markets, where many similar or substitutable alternatives exist for consumers, firms must differentiate their offerings on one or more important and relevant consumer dimensions and distinguish themselves as the place to shop.

In marketing, the concept of choosing and using one or more important consumer dimensions to compete with others for customers is known as the unique selling proposition (USP).  The USP is the thing or “angle” that firms use to differentiate themselves from their competitors in the minds of the consumers.  Banks, for example, try to attract customers by offering free accounts, convenient locations, competitive interest rates, or family-friendly service.  Grocery stores create exchanges by emphasizing low prices, local ownership, superior customer service, or exceptional selection.  Colleges and universities try to attract students with promises of student-faculty ratios, low tuition, scholarship assistance, flexible class times and locations, and personal interaction between students and faculty.

The effective development and use of USPs can create competitive advantages for companies.  When a firm’s USP is truly “unique,” it can create monopoly-like advantages for the firm.  Economists use the term “monopolistic competition” to describe this idea.  It refers to a firm in a competitive market that offers its goods or services in a way unlike any of its competitors.  When competitors cannot easily copy a firm’s USP, it can become a form of sustainable competitive advantage for the company. 

A USP that is not unique will not lead to competitive advantages for firms.  When everyone offers low prices and outstanding customer service, no one is unique.  Firms that identify other relevant and important things needed and wanted by customers will attract customers to their offerings—perhaps in monopoly-like ways.  To do that, firms must be in tune with consumer needs and wants, be aware of competitors’ strategies, create organizational systems that meet consumer needs, make consumers aware of their offerings, and offer their products and services at prices and in places desired by consumers.    

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