This is a longer version of an interview that appeared in the November 2012 issue of REPLACEMENT CONTRACTOR.

REPLACEMENT CONTRACTOR: You note in your book, Creating Competitive Advantage, that the business owner’s biggest threat is the one he doesn’t see. Why is that?

Jaynie Smith: Companies get complacent about stating, or re-stating, their value proposition. The customer goes away because the company doesn’t articulate its competitive advantages. It’s not about bringing in new sales, it’s about keeping the customer you have. If someone waves a lower price, and you haven’t given those customers a solid list of relevant advantages, they’ll be gone.

Research Rather Than Guessing

RC: You’ve pointed out that competitive advantage comes as cost or differentiation. How would a company know what it has right now to differentiate it?

JS: When it comes to what prospects or customers want — the qualities that differentiate — the gold standard is the voice of customer research. Otherwise you’re guessing. Say you think customers buy windows because of rebates and lower price. If you did research, you’d find that it was about installation satisfaction.

RC: You argue that a competitive advantage is objective, quantifiable, unique, and unclaimed. Can a company really find that many qualities that fit that definition?

JS: I can find 50. Most companies are product-centric or service-centric, when 90% of the time those are commodities. The decision to buy is going to be made by, for instance, whether or not they reach a real person on the phone when they’re calling, or quick resolution of service issues, on whether or not the invoice is accurate, and how well a company holds people accountable. So few of the things people want are what companies actually sell around.

RC: In your new book, Relevant Selling, you say that price is “not the most important buying factor ... 90% of the time.” That’s no doubt true for business-to-business selling, but how about in-home selling?

JS: It’s true all of the time if value is communicated. I can’t stress that enough. If three contractors come in and give three quotes and I like Joe better than Harry but Harry is cheaper, I pick Harry. But if Joe’s going to do the best job, if he reassures by showing me his track record of being on time, sticking to budget, no re-dos, then he builds that confidence and gets the business.

No Family Advantage

RC: You mention that “family ownership is seldom a competitive advantage.” There are a lot of contracting companies that emphasize family ownership in their marketing and sales. Why don’thomeowners care?

JS: It’s not a buying criterion. Many times it can work against you. Sometimes people are going to think: Hey, they’ve got Cousin Joe on the payroll not because he’s talented but because he’s Cousin Joe. If you Googled “family-owned business,” you’d get 91 million links. How does that make you different?

RC: Many of the best home improvement companies send out customer satisfaction surveys. You call these “company report cards” and note that double-blind surveys — where neither the person doingthe interview nor the person being interviewed know who’s behind it — are the only accurate measure of customer relevance. Why?

JS: It’s important to get feedback. But it’s what’s not on those surveys that’s often more important. We might ask customers to rate our people on whether or not they were neat and clean, showed up on time, and had the right tools for the job. But we don’t ask about whether or not the invoice was accurate. Or how the actual construction was done. So what if we’re not asking about those aspects of the job that are really important to that customer? You’re asking them to rate you on performance, but you’re not asking them what attributes they value or desire.

RC: You point out that customers and prospects have different hot buttons — how do I determine what those are?

JS: Marketing research will tell you. Say we do 100 interviews, including 50 prospects and 50 customers. We find, in cross-tabbing them, that 70% of the time their needs are different. The customer knows you, the prospect doesn’t. So the prospect is looking for confidence, stability, that track record. That fades once they’re customers. So the marketing message for customers should be different than the message to people you’re trying to sell for the first time.

RC: You write that in addition to price, “relationships are similarly overrated.” Are you saying that relationship selling is meaningless?

JS: It’s not meaningless, but it’s one leg, not the whole stool. Salespeople come in and they start talking about my cat or my kids. Hey, I know what you’re doing. And it’s not building a relationship. But even if I like the guy and get good vibes, it’s still one leg. Liking someone is not a criterion to buy.

—Jaynie Smith is the author of two best-selling business books: Creating Competitive Advantage and (most recently) Relevant Selling . She is a featured speaker at the forthcoming Replacement Contractor Executive Conference, in Las Vegas, Feb. 20 – 22.