As small company owners and managers, very few of us have ever had the luxury of working for a market leader. More often than not there is at least one other company in the industry with higher annual revenue, better quality, more name recognition, or a significantly longer list of customers. Small companies spend their entire existences playing catch-up, and most are never able to crack the invisible barrier between first and second place. But there are a number of creative ways to do it, and one of them is detailed in the following real-world example.
In the mid-1990s, Korean automaker Hyundai knew they had a problem. After more than a decade of flooding the U.S. market with sub-par vehicles, Americans were all but refusing to purchase a Hyundai because of the huge perceived quality risk. In response, Hyundai added a previously unheard of 10-year, 100,000-mile warranty to all cars sold into the U.S. market. Since that time Hyundai has grown to become the fifth largest auto maker in the world, and in 2006 surpassed longtime rival Toyota to place third in the JD Power and Associates quality rankings behind Porsche and Lexus.
Fast-forward to just a few hours ago, when I saw something that prompted me to write this post. At the height of the economic slowdown, where several major auto makers are facing extinction and experts are predicting an unemployment rate of 8 percent, Hyundai has responded again with another unprecedented offer: if you buy a Hyundai in 2009 and lose your job some time thereafter, Hyundai will take the car back, and you can walk away from the loan.
Whether or not this program will allow Hyundai to survive the 2009 economy remains to be seen, but either way the company deserves an A+ for effort. While other automakers are dancing around the issue by offering zero percent financing, free rear-seat DVD players and oil changes for life, Hyundai has cut right to the chase by eliminating the #1 concern new car buyers have right now: “What if I lose my job?”
With the above in mind, is there something to be learned by small companies in all of this? One of the most common traps small company executives fall into is trying to catch the industry leader by doing what they do—emulating their business model, mirroring their marketing messages, offering the same features or services, and so on. But Hyundai has laid out an easy-to-follow, three step process for making up ground in a highly competitive industry, regardless of your size:
Step 1: Identify the primary reason people are hesitant to buy from you. Are your prices higher than those of your competitors? Are your products or services perceived as lower quality? Use your marketing and sales departments to determine the REAL reason you regularly lose out to larger competitors.
Step 2: Have the guts to admit it. Sometimes, ego will not allow you to admit that a competitor has a better product or friendlier service. But if it’s true, it’s true—and like any 12-step program, you can’t address a shortcoming if you won’t admit it exists. If a global automaker can admit to the world their quality record stinks, you can fess up to the fact that one of your competitors has a few more high-profile clients than you do.
Step 3: Address it in a creative way that will get you noticed—and one that your competitors won’t (or can’t) match. Instead of taking the easy way out and making the same tired offers other companies were making, Hyundai threw its fishing rod into the lake and pulled out two whoppers. To this day 10/100 warranties are nearly unheard of among American automakers, and the Big 3 U.S. automakers cannot absorb the risk of allowing people to return their cars, no matter what the reason.
What Hyundai ultimately did in both cases was identify EXACTLY what was stopping people from making a purchase, and tackle each issue head on. It seems like a simple concept, but ego combined with a lack of creativity can make this strategy a difficult thing for small companies to actually implement. Do you have an example of a situation where this strategy worked (or didn’t work) in your particular industry? If so, please feel free to post your story for others to read.