"How do you create a perceived value to differentiate yourself from the competition, when you are both selling a commodity?"
That's a question I'm often asked in my seminars. It uncovers a problem that is spreading to almost every industry. The rapid pace of technological development and our ultra-competitive global economy means that no one can keep a competitive edge in their product for very long. Develop a hot new product or service, and before you can take your first check to the bank, a competitor has a hotter or cheaper version. As a result, customers are more and more inclined to view your product or service as a commodity - no real difference between you and the next guy.
This complicates life for the salesperson. In some cases, you are selling exactly the same thing as your competitor. I spent a number of years selling for a distributor who sold, for the most part, exactly the same products as four or five competitors. Many of my clients work in this arena. Lumber distributors (a piece of lumber is a piece of lumber), industrial fasteners (a screw is a screw is a screw), petroleum (87 octane gasoline is 87 octane gasoline) etc. The list goes on and on.
In other cases, your product may not be exactly the same, but the customer views your product as a commodity with no real differences between what you sell and what your competitor offers. How much real difference is there between Coke and Pepsi after all?
Regardless of the situation in which you find yourself, the problem for the salesperson is the same - getting the business in the face of the customer’s perception of your "me too" product or service.
So, what do you do? This. To put it simply, you must detail and communicate the important ways your offering differs from your competitors.
That's easier said then done. To do so effectively, you need to spend some time thinking and preparing. And that means that you must carefully consider the two most important elements of the sale - your offering, and your customer. In this column, we're going to focus on one part of that equation - your offering.
Granted, your product may be exactly the same as the competition, but the totality of your offering may be dramatically different. I use the word "offering" to indicate every aspect of the purchasing decision - not just the product. For example, the customer buys the product from a company - yours or the other guys. The customer buys it from a salesperson - you or the competitor. Your company and you are part of the "offering." In addition, there may be differences in your terms, delivery, your customer-service capabilities, your follow-up, your return policy, your value-added services, etc. All of these are part of your "offering."
The product may be identical, but everything else about your offering may be different. For example, let's say you are contemplating purchasing a new Taurus. You have identical price quotes from two dealers. The product is the same, and the price is the same. However, one dealer is close by, the other across town. One dealer has a reputation for great customer service; the other has no such reputation. The salesperson for the first dealer is the brother of an old high-school friend, while the salesperson for the second dealer is a bit cocky and pushy. The first dealer has a clean, comfortable establishment, while the second one is cramped, cluttered and dirty.
From whom do you buy your Taurus? Stupid question. Of course you buy it from the first dealer. Not because of any differences in the product or the price, but because of differences in the offering. Got the idea? There is a whole lot more to a decision to buy then just the product or the price.
Your first job is to identify those differences. Here are some very specific steps you can take today.
ONE: Think about everything that is associated with the product when a customer purchases it. Create several categories, and label columns on a piece of paper with the names of those categories. For example, the first column could be headed with the word "company," the second with the word "salesperson," the third with "terms." Continue in this way, identifying every aspect of the offering and placing each of those components at the top of a column.
TWO: Now, consider each column one at a time, and list all the ways that your offering differs from your competitor's in that column. For example, your company may be locally owned as opposed to your competitor's branch of a national company. Or you may be physically closer to the customer, or larger, smaller, newer, older, etc. After you've exhausted one column, move onto the others, filling in the details as you go.
THREE: This exercise will typically reveal dozens (and in some cases hundreds,) of specific, detailed differences. Far too many than you can easily communicate to the customer. So, your next step is to pick out those differences that are most important to your customer. Keep in mind that often what you see as important may not be viewed that way by your customers.
At one point in my career, I worked for a company that celebrated its 100th year anniversary. That was unusual. No other competitors had been in business nearly that long. The company decided to make a big deal about it. A history of the company was written, brochures printed, even murals depicting significant moments in the company's history were painted on the walls of the corporate office. We all thought it was important.
Our customers, however, didn't care. After respectfully listening to our boasting, their response was some form of "So what?" In other words, our 100 years didn't mean anything to them. In no way did it make their jobs easier, simplify their lives, or make them more important to their companies. What we thought was important turned out to be irrelevant from our customers´ perspective.
Don't make the mistake we made. Instead, take the time to critically analyze your list, and eliminate those items that are not important to your customer, that don't impact their jobs or make a difference to them. You should be left with a handful of items.
FOUR: One more step to the preparation. Translate each of those items into statements of benefit to the customer. For example, your company may be local, while your competitor ships from 50 miles away. So what? What does that mean to your customer? You could translate that item of difference into a benefit by saying something like this: "As opposed to some other suppliers, we're just 15 minutes from your plant. This means that you can get quick delivery of emergency shipments, as well as rapid response to any problem that might develop. So, you'll have potentially less downtime in the plant, and of course, less stress and pressure on you."
Now that you've professionally prepared, you are ready to communicate those differences to your customer. You need to point them out in an organized and persuasive presentation.
Prepare a sell sheet with each of the differences noted as a bullet. Next to each bullet, have a few comments that capsulize the benefit statements you prepared. Then, meet with your customer, lay the sheet down in front of him/her, and talk down through it, explaining each point as you go.
Treat it like you would any other well-done presentation. Be sensitive to your customer’s reaction, and ask for feedback as you work down through the list. Say, "How does that sound?" or "Does that make sense to you?" and emphasize those things that seem to be more important to your customer. Then, leave that sheet with your customer.
I'm always amazed at the number of salespeople who are confounded over the customer's perception that their product is just like the other guys, when those salespeople have done nothing to show the customer how it is different.
As always, if you have done a good job of analyzing, preparing, and communicating, your customer's perception should be altered, and you gain the business. If you haven't done well at this, then your customer will continue to see no difference between buying it from you and buying from the next guy. And, if you haven't shown him/her sufficient reason to buy it from you, then he shouldn't.
From the customer's point of view, if your offering is just like the competitor's, then the customer is absolutely correct in buying from the cheaper source. However, if there is any difference between your offering and your competitors´, than the responsibility is totally yours to show the customer that difference. Follow the process described here, and you'll have far fewer customers treating you like a commodity.
Copyright 2002 by Dave Kahle
About Dave Kahle, The Growth Coach®:
Dave Kahle is a consultant and trainer who helps his clients increase their sales and improve their sales productivity. He speaks from real world experience, having been the number one salesperson in the country for two companies in two distinct industries. Dave has trained thousands of salespeople to be more successful in the Information Age economy. He's the author of over 500 articles, a monthly ezine, and four books. His latest is 10 Secrets of Time Management for Salespeople. He has a gift for creating powerful training events that get audiences thinking differently about sales.
His "Thinking About Sales" Ezine features content-filled motivating articles, practical tips for immediate improvements, useful resources and helpful tips to help increase sales. Join for NOTHING on-line at http://www.davekahle.com/mailinglist.htm.
You can reach Dave at:
The DaCo Corporation
3736 West River Drive
Comstock Park, MI 49321
Phone: 800-331-1287 / 616-451-9377
Fax: 616-451-9412
info@davekahle.com
http://www.davekahle.com
Tuesday, May 26, 2009
The Commodity Super Cycle (by Mic Hayes)
No doubt you are feeling the effects. Oil prices keep rising, the price of bread is up and just about everything costs more than it did a year ago. Unlike previous periods in history the current trend to higher commodity prices is unlikely to slow anytime soon. What makes this cycle different from previous inflationary periods is the sheer number of people on planet earth. During my lifetime world population has more than doubled from just fewer than 3 billion in 1950, to nearly 7 billion in 2008. This growth rate is unprecedented in human history.
It took 130 years for world population to double from 1 billion to 2 billion. In this century it will only take fifty to sixty years to double world population. We are now in what is termed a logarithmic growth phase. The curve is steep and getting steeper. The planet has a finite amount of resources and space. We have more and more people demanding fewer and fewer resources resulting in higher prices. All of this translates into continued higher prices for commodities - in essence a super cycle of increasing prices.
Higher standards of living around the world add to the stress on world commodities. People earning more and living better demand increased quality and quantity of food, housing and transportation. Asia's rapidly growing economy is one of the key reasons for the higher prices in copper, zinc and aluminum to build infra structure and new housing for a growing middle class. Fortunately there are investment strategies available to profit from these unique economic circumstances.
The prudent investor should be positioned in the commodity markets to take advantage of rising prices. Commodity trading can be a very risky venture. It requires a good understanding of fast moving markets and time to keep a close eye on market activity. We strongly recommend seeking professional advice before making a financial commitment.
Michael Hayes is an active Futures/FOREX trader. He publishes a weekly trade plan for Futures and FOREX traders. His trading tools for TradeStation users and weekly Trade Plans are available CTGFutures
It took 130 years for world population to double from 1 billion to 2 billion. In this century it will only take fifty to sixty years to double world population. We are now in what is termed a logarithmic growth phase. The curve is steep and getting steeper. The planet has a finite amount of resources and space. We have more and more people demanding fewer and fewer resources resulting in higher prices. All of this translates into continued higher prices for commodities - in essence a super cycle of increasing prices.
Higher standards of living around the world add to the stress on world commodities. People earning more and living better demand increased quality and quantity of food, housing and transportation. Asia's rapidly growing economy is one of the key reasons for the higher prices in copper, zinc and aluminum to build infra structure and new housing for a growing middle class. Fortunately there are investment strategies available to profit from these unique economic circumstances.
The prudent investor should be positioned in the commodity markets to take advantage of rising prices. Commodity trading can be a very risky venture. It requires a good understanding of fast moving markets and time to keep a close eye on market activity. We strongly recommend seeking professional advice before making a financial commitment.
Michael Hayes is an active Futures/FOREX trader. He publishes a weekly trade plan for Futures and FOREX traders. His trading tools for TradeStation users and weekly Trade Plans are available CTGFutures
How Innovation Adds Value In Commodity Style Markets (by Lori Colman)
Do you operate in a marketplace with little perceived distinction between product offerings, where purchasers believe they can substitute one product for another, and products compete mainly on price? If so, your product or service is being "commoditicized," perhaps with disastrous results. We all know the warning signs: no perceived distinction between competitive offerings, high levels of substitutability, competition based on volume and price.
Even products with stable sales, recognized names, differentiated marketing and sales people who know how to sell competitive advantage are falling into the black hole of commoditization. Research conducted by Colman Brohan Davis for a global ingredients manufacturer found that you can still be perceived as a commodity if:
" Your product or service is handled by a sales force or broker network that also handles other, similar offerings.
" Your product exists within a silo-type organization or within a business unit of a very large enterprise. The farther down the organization chart your brand appears, the less likely it is to get the attention it needs. And even though the corporate parent name may be known, your particular brand may not be memorable.
" Your revenue is static or in decline and you've been marketing the same way for more than two years. Meaning, you have talked about the same product attributes, using the same sales force, with the same sales pitch, using the same materials, relying upon the same media mix and approaching the same customers.
If you see yourself on this slippery slope to commodity status, it may be time to reinvent your brand.
The Keys to Innovation
Four overarching directives contribute to a successful innovation process.
1) Collaboration with all stakeholders. Build an Innovation Team that includes key players within your organization as well as outside sales or broker teams, customers and marketing partners.
2) Keep on open mind. This is easy to say but often hard to do in the face of entrenched structures. Older products or services especially are often burdened with "we've always done it this way" baggage.
3) Keep a laser-sharp focus on the customer. Elevation above commodity status is done through and by your customers. What you find out about, and from, your customers and their customers will influence all your key decisions and keep you on track to affect meaningful change.
4) Think like a CEO. Analyze. Prioritize. Rank the discoveries that will come out of the data. Be bold in championing new approaches that reflect the new information you have worked so hard to collect.
From Commodity to Brand
The journey from same-as commodity to a value-add brand begins with industry, competitive and company data. Audit your current situation thoroughly. Industry trend data is needed along with a complete competitive analysis. Map your sales processes and your internal and external communications.
Customer knowledge is next. Learn what your customers do and think, and what their customers do and think regarding your product or service. Use phone and e-surveys as well as insights from internal sales people and broker teams.
Identify the basis for differentiating your product from all the similar products in its category. Analyze product features and product quality. Look at service and support systems. Are there bundling or risk management factors that separate you from your competition?
Segment your audience by industry and customer type. Identify higher value customers and those with potential for becoming higher value. They are the ones on whom you should focus most of your resources.
Create a powerful image for your brand. Your messaging should be highly targeted and relevant to specific customer and industry segments. Give customers emotional and rational reasons to buy.
Now engage your sales team and activate channel marketing efforts. Restructure if necessary. Invest in training so brokers and frontline sales people can articulate the important differentiating factors that will motivate sales and build share.
Innovation can help you add value and win back share. Yes, it's hard work. But it's not as hard as making a living as a commodity.
Lori Colman is the founding partner and Co-CEO of Colman Brohan Davis, a Chicago-based strategic branding and creative marketing firm founded in 1988. Lori is instrumental in developing brand strategies and marketing initiatives for business-to-business companies in industry sectors including technology, financial services, professional services, pharmaceuticals and manufacturing. A particular passion is adding value to commodity-style products and markets. Colman Brohan Davis is included on BtoB Magazine's current "Top Agencies" list and is a certified Women's Business Enterprise. Contact Lori at lcolman@cbdmarketing.com
Even products with stable sales, recognized names, differentiated marketing and sales people who know how to sell competitive advantage are falling into the black hole of commoditization. Research conducted by Colman Brohan Davis for a global ingredients manufacturer found that you can still be perceived as a commodity if:
" Your product or service is handled by a sales force or broker network that also handles other, similar offerings.
" Your product exists within a silo-type organization or within a business unit of a very large enterprise. The farther down the organization chart your brand appears, the less likely it is to get the attention it needs. And even though the corporate parent name may be known, your particular brand may not be memorable.
" Your revenue is static or in decline and you've been marketing the same way for more than two years. Meaning, you have talked about the same product attributes, using the same sales force, with the same sales pitch, using the same materials, relying upon the same media mix and approaching the same customers.
If you see yourself on this slippery slope to commodity status, it may be time to reinvent your brand.
The Keys to Innovation
Four overarching directives contribute to a successful innovation process.
1) Collaboration with all stakeholders. Build an Innovation Team that includes key players within your organization as well as outside sales or broker teams, customers and marketing partners.
2) Keep on open mind. This is easy to say but often hard to do in the face of entrenched structures. Older products or services especially are often burdened with "we've always done it this way" baggage.
3) Keep a laser-sharp focus on the customer. Elevation above commodity status is done through and by your customers. What you find out about, and from, your customers and their customers will influence all your key decisions and keep you on track to affect meaningful change.
4) Think like a CEO. Analyze. Prioritize. Rank the discoveries that will come out of the data. Be bold in championing new approaches that reflect the new information you have worked so hard to collect.
From Commodity to Brand
The journey from same-as commodity to a value-add brand begins with industry, competitive and company data. Audit your current situation thoroughly. Industry trend data is needed along with a complete competitive analysis. Map your sales processes and your internal and external communications.
Customer knowledge is next. Learn what your customers do and think, and what their customers do and think regarding your product or service. Use phone and e-surveys as well as insights from internal sales people and broker teams.
Identify the basis for differentiating your product from all the similar products in its category. Analyze product features and product quality. Look at service and support systems. Are there bundling or risk management factors that separate you from your competition?
Segment your audience by industry and customer type. Identify higher value customers and those with potential for becoming higher value. They are the ones on whom you should focus most of your resources.
Create a powerful image for your brand. Your messaging should be highly targeted and relevant to specific customer and industry segments. Give customers emotional and rational reasons to buy.
Now engage your sales team and activate channel marketing efforts. Restructure if necessary. Invest in training so brokers and frontline sales people can articulate the important differentiating factors that will motivate sales and build share.
Innovation can help you add value and win back share. Yes, it's hard work. But it's not as hard as making a living as a commodity.
Lori Colman is the founding partner and Co-CEO of Colman Brohan Davis, a Chicago-based strategic branding and creative marketing firm founded in 1988. Lori is instrumental in developing brand strategies and marketing initiatives for business-to-business companies in industry sectors including technology, financial services, professional services, pharmaceuticals and manufacturing. A particular passion is adding value to commodity-style products and markets. Colman Brohan Davis is included on BtoB Magazine's current "Top Agencies" list and is a certified Women's Business Enterprise. Contact Lori at lcolman@cbdmarketing.com
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