Increasingly, this tack means not competing on price, but convincing customers that small businesses offer more value. To do so, successful entrepreneurs adopt several strategies. Like Reid, many emphasize value-added services. These services can cement customers' trust and foster the belief that entrepreneurial businesses provide more homespun authenticity. According to branding experts like Paco Underhill, author of the bestselling book Why We Buy: The Science of Shopping(Touchstone Books), authenticity is a value highly sought after these days-hence the popularity of Saranac, Sierra Nevada and other microbrewed beers that project an image of locally made authenticity.
Services that make consumers think they're receiving more value can take on several forms. For many companies, service means regularly traveling around the country to meet with large customers and gauge their needs. Judy George, founder of Norwood, Massachusetts-based Domain Home Fashions, a small chain of home furnishing shops in the Northeast, says she spends as much time as possible on the road chatting with her clients. Candy Nichols, owner of a chain of children's clothing stores in New York City's suburbs, uses a similar tack: She sends personal shoppers to some customers' homes with racks of clothes so clients don't have to leave their houses to shop.
In other cases, value-added service simply means always having a knowledgeable employee available to handle customers' needs, something very few large corporations can do. (Large companies like Dell Computer and Southwest Airlines that do offer a high level of service and a human touch have prospered enormously.) For Reid, this level of service requires spending the money to have more employees on the floor than his giant competitors.
John Moretti, owner of Fountain of Youth, a health-food store in Westport, Connecticut, provides this level of service by personally greeting every customer who comes through his door and asking each one what he or she is looking for. "We actually have benefited from having [health-food chain] Wild Oats open near us," says Moretti, 54. "People see some things at Wild Oats, don't understand what they are and come into my store. I greet them, they get advice about these products they saw, and they wind up buying many things." (Moretti answered Entrepreneur's questions via cellphone, and he occasionally broke off the interview to welcome each customer who came in.)
For Audiophile Internationalco-founders John and Marianne Turton, 49 and 47, respectively, this level of service necessitates educating themselves so thoroughly about old records that they can provide more information about each LP than nearly any music store owner in the country. Operating their Web-based vintage records business from their home in Fair Oaks, California, the Turtons outsource tasks they know less about, like Web design, and spend nearly all their waking hours listening to records, writing commentaries about each LP, and personally communicating with customers by e-mail.
To provide this level of service, you must empower your employees. "Allow your employees to educate themselves about the business and make important decisions so they have a stake in the company," says Sanow.
Though large companies often can pay slightly higher salaries, entrepreneurial companies are better able to offer employees a variety of roles and greater involvement in the business, allowing them to more easily empower employees, notes business consultant Jerome Klein, president of JHK Marketingin San Rafael, California.
Many successful entrepreneurs also back up their commitment to value-added service with a guarantee. The Turtons vow that customers can return anything for any reason, and despite that risky strategy, Audophile has prospered, garnering almost 3,000 regular customers. Other entrepreneurs take even larger risks-risks necessary to show customers the value of their services. Angela Llamas-Butler, 38-year-old founder of Pittsburgh software company Delta System Designs Inc., got a contract from the local police department in 1999. When one of the other firms working on the contract went out of business, Llamas-Butler decided her firm would take on the defunct company's workload-for free. By doing so, she sacrificed hundreds of thousands of dollars in potential fees. The gamble worked: Her dedication to providing service impressed the police department, which ultimately gave her a new, larger contract.