“Priceless Competition”

A few years ago, Wayne Hampton found himself jerked into a price war.

Founder of Waco Composites I Ltd. in Waco, Texas, Hampton manufactures bulletproof panels used in hospital emergency rooms, banks, guardhouses, police stations, residential safe rooms — anywhere there’s a potential security threat.

In 1999, one of Hampton’s more established competitors saw the three-year-old Waco Composites as a serious threat and suddenly cut his panel prices to $13 per square foot from $15.

"He was trying to starve me to death," Hampton says. Losing orders, Hampton matched the cuts — and gross profit margins fell to 18% from 28%.

A few months later, the competitor baited Hampton by slashing prices again, moving to $10.50 per square foot. Hampton knew he had two choices: Follow suit and see profits sink even lower — or find a way to differentiate his company.

He picked the second option and began to introduce initiatives to enhance both product value and Waco Composites’ image in the industry.

Fireproofing. Up to then, Waco Composites’ fiberglass panels were no different from competitors, which made them a commodity item. Believing that fire-retardant panels would benefit his customers, Hampton hired an engineer who developed a new manufacturing process that earned Waco Composites’ panels a one-hour fire rating from the American Society for Testing and Materials. What’s more, this process added only pennies to company costs.

Faster shipping. In contrast to the industry norm of product arriving within three to six weeks, Waco Composites began to ship its goods within 24 hours of receiving an order. This enabled customers to order at the last minute, keeping payables off their books longer.

Friendly, professional service. Customers told Hampton that competitors were perceived as unfriendly — even rude at times — and slow to provide quotes. Hampton quickly implemented formal policies to highlight his company’s image of being friendly, fast and professional. For example:

• Calls are taken by real people — usually on the second ring — not an automated system.
• All price quotes are provided within an hour, compared to the several days sometimes taken by competitors.
• No profanity or slang is allowed in conversations with customers.

Some of these changes are about perceived value rather than tangible value. But that doesn’t matter, Hampton says: "Perception is everything. It’s as important as real value in the mind of the customer. And, unlike competitors’ pricing, your company’s perceived value is something that you have control over."

The payoff: Hampton’s decision to compete on a different battlefield — value-added versus commodity-driven — has enabled him to maintain higher prices. Since 2001, revenue at Waco Composites has increased by 10% and gross profit margins have increased to 24% from 18%. "We’re moving in the right direction," Hampton says.