Jesse Smith’s Blog

In my last post, I touched on the idea of attracting customers by being different from the other available options. This is a really fundamental business concept, so I wanted to come back and talk about it at greater length and in a more general sense.

Altogether too many businesses start with thinking that goes something like this: “Roughly 100,000 tourists pass through my city per year. If I can get just 1% of them (1000) to stay at my bed-and-breakfast and spend $300 each I’ll be all set.”

I don’t think this works so well. You haven’t given those 1000 tourists any reason to choose you over all of the other hotels in the area. If you don’t have anything distinctive to offer (or don’t tell people about it) then the only thing you have left to compete on is price. This is a bad strategy for multiple reasons. First, it’s very hard for a small business to compete on price. Small businesses don’t have the economies of scale, the recognized name, or the ability to treat a product or service as a loss leader the way large businesses often do. Second, even if you succeed at competing on price, it’s a bit of a hollow victory to know that you intentionally pushed down your own revenues. It reminds me of that old joke. “Sure, I’m losing $20 on every sale, but I make up for it in volume.”

Here’s what I think is a much better approach. Instead of the business plan above, try this: “Roughly 1000 tourists pass through my city each year who are interested in turn-of-the-century maritime history and memorabilia. If I can get all 100% of those tourists to stay at my bed-and-breakfast (converted from a 1903 fishing boat) and spend $300 each I’ll be all set.”

Obviously, capturing 100% of any market is impossible; this is a gross simplification to make a point. The point is to offer those 1000 people something that they want and cannot get anywhere else among your competitors. You need to find some way to be the #1 choice for a specific group of people, rather than just one undistinguished choice among many for a larger and less defined group.

What kind of difference are we talking about? That really depends on your environment. If you are the only B&B in town, that fact alone may be difference enough to make you the #1 choice for the kind of people who like staying at B&Bs instead of at larger hotels. But if there’s more than one B&B, then you need to come up with something else. As counterintuitive as it may seem, you need to narrow your audience. There are all sorts of ways you can differentiate yourself:

• Architecture: Is your B&B in a particularly interesting or historic building? Play it up as much as possible. Decorate the interior with historically-appropriate furnishings, serve a period-appropriate breakfast, etc.
• Location: Are you the closest lodging to a tourist attraction? Tell everyone about it.
• Service: Maybe your customer service goes above and beyond the other alternatives in the area. Maybe you offer individualized guided tours of your historic neighborhood.
• Breakfast: Is it just the same scrambled eggs and pancakes that every other B&B offers, or do all of the guidebooks and travel websites rave about your elaborate morning meals? Do you serve a formal Victorian high tea in your 1890s seaside cottage?
• Theming: We had a 1903 fishing boat in the example up above. Or perhaps your inn caters primarily to ski enthusiasts, or to surfers, or Anglophiles, or Greek tourists, or whoever. Whatever your theme is, go all out. Be the only choice in the area for someone who wants to stay at that kind of place.
• Family-friendliness: Do you go out of your way to attract families as guests, with high chairs, games, organized activities for children, etc.? Or do you go to the other extreme entirely, and have nightly poker games and a cigar lounge? Both are perfectly reasonable approaches - just be sure to pick one and go for it.

These are just a few ideas to get your imagination going. There are all sorts of creative ways of being different from the other options.

What if there’s already an Irish B&B in your neighborhood, but you really wanted to start one? Well, one of you will eventually become known as the #1 Irish B&B and the other one already has a head start. So you need to think of some way to differentiate yourself even further.

Why do you have to do this, anyway? Why not just target that 1% of the general tourist crowd? Because as a small business, you need to make your customers love you and tell their friends all about you. Nobody will do that if you are just one more bland option among many. That’s the key to building good word-of-mouth reputation: identify a very well-defined segment of your customer population, and thrill them.

Further Reading

I blatantly stole most of these ideas from Al Ries and Jack Trout, whose book Positioning is one of the true classics in marketing. Most of their examples are about big companies (Coke vs. Pepsi, Hertz vs. Avis, etc.), but I think this idea is even more critical for small businesses to understand.

Another angle on the same concept is Seth Godin’s Purple Cow. Seth says to “be remarkable!” Once you’ve seen one cow you’ve seen them all, but what if you saw a purple cow? That’d get your attention, wouldn’t it? (Until you saw a few more purple cows…)

As For Myself

So how does all this apply to my own business? Wholeweal Software is about a month or two away from shipping a new software application called EverybodyInn, to help B&Bs and small hotels manage their businesses and keep track of their guests and reservations. As I developed this software, I gave a lot of thought as to how I would differentiate it from the other competing products out there.

The hotel industry is a big one, and there are lots of different software packages servicing different niches in this industry. Some cost hundreds of thousands of dollars and integrate into every little aspect of a hotel’s operations. They integrate with the door key swipecard system. They keep track of the cleaning schedules. They link in with the automated refrigerator inventory system. They do a lot, and on the flip side, they’re shockingly complicated and difficult to use, too.

As a tiny little startup company, we’re not even going to try to sell to that type of big hotel. Software like that is sold by flying a big sales team in for presentations, demos, and golf outings. That’s, uh, not really in our budget yet.

So EverybodyInn doesn’t have a lot of those features that are helpful to giant hotel chains. Instead, it’s specifically designed for small hotel and B&B owners who are currently keeping track of their reservations with a big calendar book and a pencil, or maybe with a spreadsheet they managed to put together, and are looking for an easier and more effective way. Every feature in EverybodyInn is carefully designed to be simple and intuitive to use, and to make the day-to-day tasks of managing reservations smoother and more productive.

Maybe some day when we’re a much larger company we might bring out another product designed for those larger hotels. But until then, I’m not even going to spend any time thinking about them. Right now, every design and business decision is made focusing on owners of bed-and-breakfasts, small hotels, and guesthouses who are looking for a better reservations management system.