Owning the point of purchase

Any business that wants to pursue a growth strategy needs to find ways of developing and strengthening their competitive advantages. It is a superior competitive advantage which increases transaction velocity which in turn drives growth. You need to find ways to reduce the sales cycle, block or negate competition and make it easier for customers to choose your product over the competitors. The firm should be looking at as many ways as possible in which they can get an edge over their competitors. One such technique is what I call “owning the point of purchase”.

When you walk into a store looking to purchase an item, you are often faced with a range of choices, often from several vendors. You have the opportunity of comparing features and functions and, of course, price. But what would happen if you were faced with a range of products all with different features and at different price points, but they were all from the same manufacturer or supplier? You could choose one or decide to go to another shop to continue your search. Chances are that many customers will choose from those available in the first store, providing they don’t feel they are not overly compromising on price or functionality. The first store reduced your choice but will be successful most of the time in making the sale.

This concept of choice reduction is done all the time although we may not be aware of it. When you go to a brand store, you can only chose products of that brand. If there is only one hire car service at the airport, you are effectively forced to take that service. When you are only offered one contractor by your insurance company, you don’t get to choose who undertakes your repair work.

Now turn this on its head – what do you need to do as the vendor? You need to own the point of purchase. Basically, you need to examine where your customer purchases and see if there is any way you can reduce the competition at that point. Alternatively, develop new points of purchase where you have greater influence over the options being made available to the customer. For example, an exclusive arrangement with a retail chain could be used to secure those outlets, you may be the only importer of a branded product or the only accessory product offered with another major purchase.

This type of positioning can be very effective where the product you wish to sell is only a small increment to the major purchase. You might be able to arrange that yours is the only finance package offered from the vendor in a car sale or the only insurance coverage offered by the travel agent with a travel package. Where you can attach yourself alongside a major purchase, buyers typically don’t waste time shopping around where the additional cost component is small.

The key to competitor blocking strategies is to put yourself in a position where you don’t compete because you are the only product on offer. A very effective strategy if you can achieve it.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.