A small guide for service creators on living with and surviving competition and commoditization

by Ashvini Kumar Saxena on February 12, 2013 · 4 comments

in Business,My Personal Thoughts

A friend of mine was expressing sadness at the fact that the work he is doing is paying really less these days. There is huge competition and since supply is high and clients are not averse to bargaining.

In the age of internet where you can get services as cheap as $5, I feel the competition will continue to increase and as more workforce from lower income countries ( not India anymore ) join the pool. The commoditization will increase and the profits and profit margin will keep going down. If you can offer your service for a $100, someone , somewhere is ready to do that in just $50 or even lesser.

Commoditization is a double edged sword

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Look at it from this angle. As a customer you can get thousands of suppliers each falling over each other to provide a service at the lowest cost possible. On the other hand, as a customer again, you are overwhelmed with choices that you have and often you need to put in a lot of time to screen the right candidates.

On the supply side, a supplier who could never have got access to customers now competes in a marketplace that has thousands of customers looking for someone to solve their problems however small they are. There are tremendous opportunities that have arisen because of this. On the negative side, it is hard to be noticed and become profitable in a highly competitive market.

Commoditization of services is almost akin to democratization. Both suppliers and customers are under constant upheaval as technology makes delivering services easy and also open up new market both for supply and consumption. The world is truly going flat as espoused by Thomas Friedman in his book, The world is flat.

As a supplier of services ( for whom this post is about), it is really hard to create a service, then publicize it, get contract and then make money out of it and that too in face of determined competition which is equally skilful.

If you are a supplier of services , you know what I am pointing at. It means

Skill is now no longer a differentiator.

ID-10062380You could know PHP, so would a million others. You would know design. There are thousands of designers graduating every year. Also there are people who are self taught and who are often a bigger threat than those with degrees because they are very passionate and committed to their work.

As a supplier of your services, then the questions that come up in your mind are as follows

 

  • How do I get myself known to potential customers?
  • How do I get paid the right amount of money for the services that I offer?
  • How do I keep growing and fighting off this ever increasing competition?

The easiest way to finding a solution is to first recognize that there is a problem. The best way then to move forward is to take stock , just like a military general preparing for war. As the commander of your own army, you need to learn what are your strengths and weaknesses are, which threats you face and where are the opportunities. If you can’t count any one without an entry , you are mistaken . Every person or company has its core strength or weakness. Every market has opportunities and threats. Once you know that , you can take appropriate action to determine, whether to attack the weakness or to fortify the strength. Also you would know how to evade a threat and exploit opportunities.

So let us take a look at how we can make most out of the competitive marketplace as a supplier

Spend slightly more time on marketing

Sure you have world class service but no one knows about them, unless you go and tell. Who would even bother to check upon you , if they do not even know your name?

With slightly more effort into marketing , you can become a powerful force. Marketing is not really very difficult. Its just about connecting with people and letting them know that you care and have some really good services.

Use more social media not less

Social media is mostly used for friendly chit chat with friends and acquaintances.  Often friendly chit chat can reveal helpful hints about what people are looking for. Using social media effectively to understand needs of people can give you valuable insight into lives of others and their needs. So the key is to use social media and make most of it , not run away from it.

Build for long, not just for today

You have an awesome service that does something right for just one day and not after that. Can you turn that service into something that helps your customer for months to come? If yes then you can charge them for convenience and they won’t mind paying. To do that you need to think creatively and create unique offerings to your clientele.

Differentiate, differentiate and differentiate

Everyone can create a logo. What is it that you differently? Is your choice of colours different? Do you have ideas that others don’t have? Are you contemporary? Do you have more options ?ID-100129658 In any kind of service , you would need to differentiate and market the differentiation points well. Only then you will be noticed from the legions you are competing with.

Where is your portfolio?

You did some great work for a client and then let them go. You did not even bother to check if they were happy. Once you got your money, you forgot to be in touch with them. Well, they don’t remember you too.

It is big mistake , if you fail to get recommendations , testimonials or any other kind of appreciation from them.

The next mistake is to file those recommendations in some obscure folder in isolation. This is like wasting the gold in your cupboard.

Take it out, dust it and then put it on your site, portfolio or anywhere else. Let the world know that you exist and that your work is appreciated.

Let the curry cook for sometime

I come from India, known for its huge varieties of curries. Curries often take an enormous time to cook. The more cooked they are ( within limits so that they don’t burn), the better they taste. When you enter into a market with skills, do not expect it to respond to you immediately. After all there are thousands of others who have been there for years and with far better contacts and experience. You are a newbie, no one will even look at you till you get marinated for some time ( again reference to curry ) .

Be patient. How much? The answer is as much as it takes, because without infinite patience you will run out of passion and do something that you won’t like in the end.

Learn to cook your curry well.

Specialize

You can design a logo so can thousands of others. The question is that, can they do it for social media companies, marketing companies or sports companies?  Do they have idea about a business? Do they know the intricacy of that business?

The need for specialization today is felt like never before. If you specialize, you become master, owner , guide of your craft and people will pay readily for what are worth .

Cultivate your customer

Your portfolio should not consist of thousands of customers who are unknown in industry but a single customer who is widely known. The quality of customers is more important than the quantity. The testimonials they give is far better than thousands of small customer who could be construed to be your friends rather than customers.

Don’t try to serve millions as your time will be divided and the satisfaction for everyone will be low. Build a small customer base and curate them.

Build upon what you have achieved

If you have already created one thousand websites for an industry, it is your pillar. This pillar will help you stand firmly when you pitch to new client. Do not let the efforts of all these years go for free.

Build upon your achievement.

No achievement is small.

Be more of a guide and help and lesser of a salesman

You simply don’t know how much it means to people when you help them without a possibility of monetary compensation and rewards. The word of mouth appeal has a tremendous value because people you help, are connected not only to their friends but also to people they share similar interest with. Once you target one such person, you can be rest assured that you are targeting their friends too.

Do not hesitate to help and do it without hope of rewards.

The reward has already been accrued in form of your increasing, multiplying reputation.

Start at the low end and move up the chain

You can never start at the top , unless you are a large company ready to put millions into marketing. As an entrepreneur , you can always start small. Its good to be at the bottom of the ladder because you will have lots of company. You will learn what works and what doesn’t. You will make partners. You will meet people frustrated by those at the top of the ladder. Imagine how much will you miss if you start at the top. Also companies , people who are at top once probably stood at the bottom and made progress to the top slowly.

Do not slack off after success

Of course you can rest but slacking off after gaining moderate success means that you have started taking things for granted. This is going to become your weakness and it will be fully exploited by your competitors who are vying to break your hold on the market. Keep alert, do not slack off .

Think of everyday as the start of your new business

Do not let old customers go away

This turns out to be the biggest mistake that you can commit. ID-100112487Old customers were there for you when you started your business. Now since you are successful, you tend to ignore them. The amount of  effort that has gone into building a customer base is enormous. By letting them go , you are doing a disservice. Instead, thank them, pamper them, invite them to your new business. Give them discounts. After all they are your brand ambassadors. Don’t let them go away.

Create ecosystem of partners

All big companies thrive on ecosystem. If it were not for a good ecosystem, they would collapse. When you are small , of course no one would like to partner with you . With time however you will find partners. Take them on board and share your profits and reputation with them. Not only you will have partners but you will have friends for life.

Create products out of services

Its really easy to sell a single service but it is far more profitable to sell a packaged service. For example you can ask $X for performing a service Y times. Give it a funky name such as “Pro”, “Enterprise” or “Elite”.

Create value and then charge whatever you want to.

Give back to the world

Both of the WordPress plugins I have are free of charge for a practical useful version. The additional publicity that I gain adds up to my portfolio. These plugins send a small traffic to my site , some of which may be converted to paid . Thus it is not a loosing proposition for me to give something for free. Corporations like IBM and many open source organization gain reputation and earn millions by giving back.

It is quite profitable and worth it to give back.

Commoditization need not hurt

There could be a huge competition but you can always make more money , have more reputation and get higher value contracts if only you play your cards right. Learn and apply. Make friends and allies.

Afterthought

I hope you like this almost two thousand word long post. If you did and it helped you , write on my Facebook wall, tweet to me or comment here. I am also soon going to start services to help small entrepreneurs. If you want to be informed about it first, sign up at the top of the page and also get my book that I wrote in 4+ months for free.

Press PDF button at the top to get PDF of the article.

Image courtesy of “federico stevanin”, “nattavut”, “cescassawin” “jscreationzs”  FreeDigitalPhotos.net

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{ 4 comments… read them below or add one }

Christian February 18, 2013 at 11:45 pm

I’m one of those self taught freelancers, I have a couple of friends that have IT specialisations like programming or web design and at the moment they don’t really have a job while I’m doing better and better as a freelancer. Not sure why, but as far as I notice I have a really keen sense when it comes to getting good clients and making them happy on the long run.
I have a couple personal clients that drive most of my profit, they are long term clients that pay a little more compared with the current marketplace price but I also offer high quality services.
I also make some decent earnings from first time clients, most come back for more, others won’t because that was really all they wanted.

Christian’s latest article :Old Pictures

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Ashvini Kumar Saxena February 28, 2013 at 5:32 pm

Hi Christian,

Sometimes self teaching and learning through discovery makes more sense. Repeating customer are the best bet because they know you. You earned their trust and that is what matters in the long run. Glad that you are doing fine :)

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Saket Jajodia February 14, 2013 at 2:24 am

Thanks a lot Ashvini, for writing such a small no. of words of article for me.. :P ;)

And I do few of them (frankly, not most of them).. However will do try to apply most of them (if not all) from now on.. :)

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Nishant February 12, 2013 at 1:20 pm

Thanks for the wonderful post Ashvini. It certainly did clear a lot of things.

One of the most common issues that I have noticed and understood is “having A LOT in mind”. A lot of people (including me) face this challenge when they are into initial stage of their business. They have so many ideas, strategies for their business that they eventually land up screwing all the ladders.

Only thing that helped me is making notes in my personal diary about the thoughts and ideas I had. Then work on them one by one. Do a couple of things at a time but make the most out of it and then move onto the next one.

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