What do you do when a competitor does something that you didn’t anticipate, that threatens your position? What if he copies your innovation (forget the IP implications for the moment)? Or recruits your people? There are many things possible, but one that lawyers see with some frequency is a competitor undercutting your price.
Do you match the lower price? Many inexperienced marketers and salespeople panic and do just that. Before you do, consider the lesson to be learned from a very old story about the $6 haircut. Here’s how it goes.
A barber has a sign above his shop that advertises $10 haircuts. His business is doing great until a competitor opens up across the street with a sign that advertises $6 haircuts. The $10 barber is beside himself because he is losing his business to the $6 barber. Instead of panicking and lowering his price (and likely triggering a destructive price war), he hits upon a genius idea: He puts a sign up above his business that says, “We fix $6 haircuts.”
The point of the story is that there is always change in business and complaining about the change, or panicking in the face of it, does you no good. You succeed by innovating and finding opportunity in the changed circumstances. Like, for example, fixing someone’s shoddy work.
Early in my career, I was on the receiving end of such creativity.
A few years out of college, I was managing a mall store for a national jewelry chain. We sold gold and diamond jewelry to middle market customers. About 150 feet away on the opposite side of the hallway was a high-end “guild” store owned by a different national chain. They sold much fancier goods, presumably to fancier people. The manager, whose name was also Mike, was a constant promoter, always “on,” even when you thought you were having a casual drink with him after work.
Late on a Saturday morning in mid-December, absolute prime time in the retail jewelry business, the power went off on Mike’s side of the mall. Dark. The industry protocol for such an occurrence was to make sure all your goods were returned from any prospective customers who were handling them, shoo everyone out of the store, drop the security gate, and wait for the power to come back on.
We’re rocking and rolling, busy as all get-out, and while I’m selling, a part of my brain is luxuriating with one recurring thought: “Mike is shut down. We’re killin’ it, and Mike is dark. Yes!”
About 2:00 or so, things quieted down enough for me to get some lunch. I had to walk past Mike’s store to get to the restaurant. As I approached, feeling really smug and expecting a dark store, I’m stunned to see an easel sign out front that said, “Join us for candlelight service.” Mike hadn’t shut down. He sent somebody to the candle store and bought dozens of decorative candles. The store looked truly exotic in that light, and it was packed. Talk about turning lemons into lemonade.
That day, my young, green-as-a-sapling self learned an important lesson in adaptability, one I’ve never forgotten.
The moral of these stories: Don’t be trapped by longstanding norms if circumstances change. Find a way to overcome the obstacle.
Many thanks to Manny Farach, partner at McGlinchey Stafford, for sharing the $6 haircut story with me; I hadn’t heard it before.