What incentives could I offer to keep customers?


-5

I'd like to start a business in the service industry (not a restaurant) with a very low barrier to entry (as such I can't give specifics).

Aside from making the best product/service that I can, what can I do to keep customers coming back to me instead of new competitors, which I think will be a problem, considering the very low barrier to entry in my market? Are there any good books on this topic?

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asked Feb 9 '12 at 15:23
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Gili
178 points
  • You mean outside of illegal methods like burning down their setups like the mafia does? Seriously? You are aware you are a nobody, not the ruler of the country, and the free market is exactly there for not allowing schmocks to keep the competition out. – Net Tecture 5 years ago
  • There is another way, make all your services free. – Natwar Lath 5 years ago
  • @NetTecture: That's not what I was asking. – Gili 5 years ago
  • @NatwarLath: Sorry, I guess I should have mentioned that I plan on making money :) Making **all** services free precludes that possibility. – Gili 5 years ago
  • Sorry for being one of those haters. I know it can be frustrating. The reality is, though, if you wanted those kinds of answers, you should have asked your question differently. Perhaps something along the lines of "Aside from making the best product/service that I can, what can I do to keep customers coming back to me instead of new competitors, which I think will be a problem, considering the very low barrier to entry in my market?" You can always ask another question along those lines. – rbwhitaker 5 years ago
  • @rbwhitaker, I took your advice. Thanks! :) – Gili 5 years ago
  • Wow, that totally changes the question. I might need to go delete my response, because it no longer really applies! – rbwhitaker 5 years ago
  • @rbwhitaker, how about updating it to answer the new question? – Gili 5 years ago
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3 Answers


3

You can't have it both ways.

If there are low barriers to entry, there are low barriers to entry. It's easy for you to get in, and it's easy for competitors to pile in after you. However, there's a little more to say, because there's a difference between low barriers to entry in a broad market and raising barriers in the slice of the market you develop.

The two concepts you'll come across (though the language varies) are lock-in and lock-out. I'll illustrate them with examples from the cellphone industry.

Lock-in is where you make it hard for customers who value what you do to migrate away from you. Have you got a cellphone contract? Chances are you're locked in - you've agreed to take service for a minimum period, and your carrier is going to work hard to encourage you to renew (lock yourself in again) when the contract is getting near to term. You've bought a commodity, but you've accepted lock-in.

Lock-out is where you make it difficult for competitors to win your customers. For instance, prepay cellphone customers may be "earning credits" which will give them a discount on a handset upgrade. The customer isn't locked in - they can walk away. But a competitor addressing an informed customer of yours doesn't just have to show they have a better offer in general, but they may have to match the $50 credit. They're locked out - or at least, their acquisition cost is pushed up.

answered Feb 10 '12 at 00:32
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Jeremy Parsons
5,187 points
  • Good answer. Are there any good books on this topic? – Gili 5 years ago
  • Most marketing texts address this at least indirectly. And I'd argue that some of Seth Godin's writing is highly relevant (and if you haven't read him yet, you should whether or not it's on track). Kudos for updating your question to use less loaded language in response to so many hostile responses to your first phrasing! – Jeremy Parsons 5 years ago
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2

The best thing you can do is provide a better service than your competitors and it won't matter. You can't really force competition to stay out of the market, and if you could, you'd soon be in for a heap of anti-trust and anti-monopoly lawsuits, which you probably don't want either.

The reality is, competition justifies your whole existence. The fact that there is a whole category of businesses trying to do it means that (a) you have a viable idea, and (b) that the potential customer base will feel like "this is a thing that people are doing these days, so I should find a business that's doing it and get on board."

Granted, it means you'll have to have competitive pricing, and fight for customer's loyalty, but it is things like these that keep your business moving forward.

I'd suggest that instead of looking for how to prevent competition from popping up, that you focus on how to best attract potential customers' attention, provide the best service you can, and do it for a price that respects the customer's wallet. I know it sounds cliche, but if you stick with learning the tried and true principles of running a good business, you'll have more success than if you focus on making sure you're the only one on the market.

answered Feb 9 '12 at 15:45
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rbwhitaker
3,415 points
  • Actually not anti competition laws are mostly criminlal cases because the only way to keep them out is pretty much inviting them for a cocktail party. With molotov cocktails in their locations. Which somehow some of those police types find insulting enough to get you in jail. – Net Tecture 5 years ago
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2

Watch The Wire and learn from the drug dealers, as they face similar issues.

I don't mean shooting the competition of course, as that is frowned upon in most jurisdictions.

answered Feb 9 '12 at 19:35
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Steve Jones
3,239 points
  • +1 for mentioning The Wire – Justin C 5 years ago
  • +1 for mentioning that shooting is frowned upon in ***most*** jurisdictions – Warren 5 years ago
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