No company wants to find itself at the mercy of downward pricing pressures, stagnating and/or suboptimal growth and being in a “me too” competitive environment. Yet, at some point, all companies will face these and other symptoms of no longer being truly differentiated and therefore seeing revenue and margins erode. So what can be done to turn this around and avoid the downward spiral?
At McMann & Ransford, we have been solving this challenge for over 30 years with clients across many industries. Rather than writing about those successes in this blog, we thought it may be interesting to share with you some strategies that organizations are taking in an industry that is literally commoditized – the metals market that includes companies that buy and/or sell steel, aluminum, carbon, and other metals in North America.
Why? We figure that if leaders in this market can differentiate themselves to achieve growth then those in other industry segments such as SaaS and productized services can too…..
Metals Industry – Some Context
Like many B2B industries, the metals industry has experienced a great deal of change. The most impactful change impacting this industry and all others is the increase of information available to the Buyer. Access to information across all industries has created a situation where Buyers do their own research and qualification, forcing Sellers to the end of the sales cycle, where price is too important.
How can B2B (business-to-business) companies with a commoditized (or nearly commoditized) product or service overcome their situation by identifying new ways for them to differentiate themselves? These companies are often market leaders for years, only to begin struggling with an “identity crisis” once their competition catches up. Almost everyone can think of an example of big players in the world that were once on top and known for a very particular product, and how, over time, their competitive product advantage dissipated. Many companies fail to make the necessary changes to regain their position at the top of the market – however, irrespective of industry, those that rebound from the commoditization trap have observable commonalities.
We conducted a market study with two premises we were seeking to prove or disprove; The first premise was:
Premise #1
Buyers in this market are wanting more than they are getting from their Sellers. We believed we would find a discrepancy between what the market is truly asking for and what the typical Seller is providing. Based on our research, the answer to the key question, “Are Buyers and Sellers in this industry misaligned with one another on “what is possible” from their relationship?” is sort of….
As it turns out, there is some misalignment between Buyers and Sellers, and the most striking example of this misalignment is that Sellers tend to view their personal relationships with Buyers as more valuable than they are in the Buyer’s eyes. We asked both Buyers and Sellers whether their personal relationships were important enough that Buyers would follow individual sales representatives if they left to work at a competitor and the discrepancy was significant.
Despite that, only a fourth of Buyers interviewed in the study responded that they are seeking their Sellers to provide new and different things, without being provided examples. However, once prompted with a few examples of things that Sellers could be providing (e.g., a wider range of services & features, including online ordering/inventory, value add processing, insights on upcoming pricing variations, industry specific expertise and advisory services) many Sellers changed their responses, saying that they would appreciate similar value-add features. Furthermore, we even heard examples of similar things they had requested from their suppliers.
These results present an opportunity for Sellers. Buyers and Sellers in this industry have become accustomed to the status quo and the traditional levers that drive differentiation (Price, Availability of product, and personal Relationships or PAR for short). Therefore, they may have blind spots to innovative possibilities that change the dynamic of the Buyer-Seller relationship. But for those willing to act, and act quickly, there may be a lot of opportunities to expand the relationship with existing customers, increase margin, and/or grow market share. How? In its simplest form, this can be accomplished by proactively bringing “ideas” to your existing accounts and guiding them on evaluating the quality and potential impact of those ideas to their business.
In our next blog, we will share with you some data regarding our second premise: there are opportunities to differentiate and win business based on factors other than Price, Availability of product, and personal Relationships.
If you are interested in the complete research report, please visit Overcoming Commoditization Through Intimacy | McMann & Ransford or reach out to Mark Slotnik and Jackie McMann for additional information.