Many small businesses and home-based businesses feel that they cannot compete with the “big boys” on a level playing field. The Internet has brought many opportunities that were previously unavailable to small businesses. But the fact remains, that big businesses have more resources – they can out bid you on marketing, pay per clicks, etc. And they get lower prices on items - thanks to their big buying power. So, how do we compete against these insurmountable odds? Of course, the answer is to find a niche that we can do well in. Business school professors will tell you that you should find a unique selling proposition –an area where you are so strong that no one can beat you on it. Easier said than done, right?

The fact is,the small businesses have several advantages over big businesses. The most important is flexibility. Big businesses get bogged down with inflexible bureaucracies, systems, procedures and high overhead. Their weaknesses can be exploited by a visionary entrepreneur. They can take advantage of unusual opportunities and niches. I will cover a big one: leveraging the advantage of small businesses to provide a customer experience that the big businesses cannot match. Of course, these require thinking outside the box. Most of these come from my experience in developing and operating holisticonline.com and specialgifts.com.

Is there an opportunity in providing superior customer experience? A recent Bain & Company survey reveals just how commonly companies misread the market. They surveyed 362 firms and found that 80 percent believed they delivered a "superior experience" to their customers. However, when they asked customers about their own perceptions, they rated only 8 percent of companies as truly delivering a superior experience. Obviously, there is a big gap between perception and reality. Leading companies assume that they're keeping customers happy without ever achieving that kind of customer devotion.

“Call it the dominance trap: The larger a company's market share, the greater the risk it will take its customers for granted. As the money flows in, management begins confusing customer profitability with customer loyalty, never realizing that the most lucrative buyers may also be the angriest and most alienated. Worse, traditional market research may lead the firm to view customers as statistics. Managers can become so focused on the data that they stop hearing the real voices of their customers.”

-James Allen, Frederick F. Reichheld, and Barney Hamilton Harvard Management Update

We can all cite example after example of good and bad experiences with various businesses. The ones providing a consistently bad “customer experience” eventually will go out of business. Today, consumers have several choices. In the past, the word of bad service may have taken a while to filter through. But with today’s instant communication, word spreads fast. A business that provides consistently poor service and experience to its customers may be on life-support.

Many people nostalgically remember the “good old days,” when the neighborhood store would provide personalized service for everything, when they know customers and their needs well. But with the advent of mega stores, these businesses slowly died, leaving customers to contend with poor service and experience.

This is an opportunity for entrepreneurial-minded small businesses. Sure, stores such as Nordstrom do this well; but as I mentioned earlier in the Bain & Company survey, most big businesses fail to provide that level of service.

Providing exceptional customer experience makes business sense. We often hear about “customer evangelists,” “word of mouth advertising” and “viral marketing.” When you absolutely pamper a customer with outstanding service and experience, they will become a loyal life-time customer. You can count on them to bring you other customers by their endorsement of your business.

Savvy entrepreneurs know a concept called “life time value of a customer.” For example, a car dealer knows that when a customer purchases a car for $20,000, he will return to service the car, buy parts and supplies for the car, etc.. If they treat their customers well, they will buy their next care there as well. They will also refer other customers to the car dealership. Carl Sewell and Paul Brown, in their outstanding book “Customers for Life” say that a good customer will spend $332,000 at a car dealership in their lifetime! This does not count on the referral business they can bring. Of course, a customer will come back only if you give them superior experience. Many times, you may lose money on the first sale due to the high acquisition cost of the new customers; but you will make money on the subsequent sales to the customers because there is no additional acquisition cost and it is pure gravy. In fact, many experts suggest that the most valuable asset of any business is its customers.

When I started holisticonline.com nine years ago, we had no marketing budget. What we had was an exceptionally good Web site that customers continually visit and refer others. We got our initial traction with several yoga teachers in UK and Australia, who enthusiastically referred their students to our site for further information. We cannot put a value to these “customer evangelists.” We grew the Web site from zero customers to currently over 8 million hits/month from over 170 countries - purely from word-of-mouth advertising and enthusiastic reviews from media. When all the high flying dot.com companies of 2000 have bit the dust, we are still going strong thanks to our loyal customers attracted by their “experience” on our Web site.

So, what is the benefit of providing exceptional customer experience? According to Carl Sewell and Tom Peters:

• If you're good to your customers, they'll keep coming back because they like you.
• If they like you, they'll spend more money.
• If they spend more money, you want to treat them better. (You can't do enough for someone who is going to spend $332,000 with you.)
• And if you treat them better, they'll keep coming back.
• They will refer their friends to you and the circle starts again.

So how do we give outstanding customer experience? We will cover that in our next article.

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About the Author:

Dr. Jacob Mathew is the president and CEO of ICBS, Inc., a Web development firm in Hudson, Ohio. He is internationally known for founding popular Web sites such as holisticonline.com, 1stholistic.com, and ecomhelp.com. Holisticonline.com receives over 8 million hits/month and is consistently ranked as one of the top Web sites for health. His latest undertaking is specialgifts.com, a Web site that sells gifts, gemstones, art and nutritional products online. He is also the CEO of Inspiracom Biotech, a biotech startup involved in drug discovery for neurological diseases.

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