““A horse never runs so fast as when he has other horses to catch up and outpace.”” –Ovid, The Art of Love

Last week I talked about price competition – and why nothing else is more important to the success of a new business. Underpricing the competition is the single strongest way to enter a new market and the reason for more great business fortunes than any other strategy.

Today let’s talk about another business-building secret – one that’s nearly as important and yet sometimes overlooked.

Sometimes The Biggest Secrets Are Just Dumb Simple

I was reminded of this secret last week while shopping with my wife in New York City. She took me to H&M, a very hot European department store that recently opened in America.

From the outside, it could have been any one of a dozen upscale stores on Fifth Avenue. Inside, the place was jamming. There were literally thousands of shoppers on the first floor alone. The cash registers were smoking.

Since none of the stores we had previously visited that day were doing much business, I wanted to know why H&M was so packed. It was more than just the novelty of a new store.

I bumped into the answer almost immediately. Someone brushed by me and knocked me into a mannequin on a pedestal. It was a male figure outfitted in a lemon-yellow paper-mache-type shirt and lime-green, calf-length parachute pants. Very trendy.

The styles I was looking at – the materials, the colors, the cuts – were just what you’d expect to see at Gucci, Fendi or Versace. But when I looked at the price tags I was shocked. Instead of $250 or $300 for the shirt, the ticket said $18! And instead of $150 to $250 for the pants, the price was $13!

It was one of those wonderful moments of dumb epiphany – realizing in a profound way something that is profoundly simple. H&M entered America the right way – with steep discounts. But they are also selling into a large and growing demand.

H&M does not feature standard brands. The stylish clothes I saw on the first floor were all trendy knock-offs manufactured in Indonesia. In place of name brands they sell style – the look of famous designers for a fraction of the price.

This is an entirely different tactic than that employed by many discount department stores that sell off-brand and out-of-date clothing at discounts. (How many near-empty discount department stores have you wandered through whose clothing is so unappealing you wouldn’t be paid to wear it?)

H&M takes a double-barreled approach. Great prices and desirable products. That’s not an easy combination to achieve. But if you can figure out how to do it, you’ve got a very strong marketing equation.

H&M’s strategy is a bit like what the Japanese car makers did when they decided to enter the luxury car market. Rather than creating styles of their own or coming up with something mundane like a Japanese Cadillac, the Japanese went right after the world’s hottest luxury car manufacturers – BMW, Jaguar and Mercedes. They knocked them off (both in terms of style and performance) and introduced the Lexus, Infiniti and the Acura NSX.

Now Americans could drive the cars they had always wanted, but for half price. It was an irresistible offer. The Japanese quickly dominated the market.

Selling Into The Stream Is The Only Way To Go For New Businesses

If you want to start a business or enter a new market, and you’ve decided to outprice the competition, give yourself a big, additional advantage and shape your product/service into something that’s hot.

Rather than coming up with something “unique and different,” figure out exactly what people want most . . . and give it to them . . . cheap.

When word gets out – and it will – that people can get what they want most for an affordable price, they will come knocking down your doors, like they are doing right now every day at H&M.

I need to clarify one point. By selling into the trend, I don’t mean selling things that are too trendy. The appeal of the far-out, avant-garde stuff is very restricted. If you want to gain market share of a big market, you need to select the big trends.

It seems to me that this strategy applies to most markets at most times. If, for example, you are starting a restaurant on a street where there are four steakhouses, you wouldn’t specialize in Turkish cuisine. You’d sell steak, but cheaper.

If you are starting a travel, tour or conference business, you wouldn’t feature discounted trips to Albania and Pretoria. You’d sell London and Paris and Orlando.

In every business, no matter how mundane, there are trends. If you are naturally contrary, as I am, you might be tempted to swim against the stream. Don’t. Find out what’s hot. Figure out how you can sell it cheaper than anybody else. Later on, when you have a strong foothold and solid profits, you can develop higher priced, specialized back-end products – even lines of products.

In business, as in the stock market, the trend is definitely your friend.