Competing with Cheaper Copycats
Henry drops out of college in September 2002 to start his own video-editing company. To buy equipment at a low cost, he logs onto ebay.com. But soon discovers that no one is selling the equipment he wants.
So Henry finds a video equipment company that carries the products he wants. On a whim, he posts an auction for that same product the day he receives it. Eight bids and seven days later, Henry sells the video equipment for a small profit. He soon does some calculations and figures that he can make more money buying and selling hard-to-find video equipment on ebay.com than by starting his own video- editing business.
His calculations prove to be correct and Henry ends up selling 70 different types of video equipment for a grand total of $500,000 in gross sales within 1 year. But others get a sniff of his success and try to copy his system.
Within no time, the copycats find sources that manufacture the equipment at a much lower cost. Henry can’t compete with them even when he sells the equipment at cost price making no profits.
When he can’t compete on price basis, Henry decides to compete on better service. Henry starts offering free technical assistance to people who buy products from him.He starts posting his phone number in all the auction listings. Even though his prices are higher, many people choose to buy from him, as installing the complex video equipment system could be a daunting task.
The sales erosion stops. But Henry doesn’t stop there. He goes on and makes a step-by-step training DVDs that help buyers install and use the equipment on their own. And earns more money selling the DVDs!
° Provide a better service and people will end up paying you more. Give free technical assistance, and provide better customer care; and people will buy from you even though your competition is cheaper.
° Make step-by-step training tutorials on how to use your products most effectively and sell them with your products.