Avoiding Commoditization with Hi-Tech Solutions - Part II
Part II – “Dare to be Un-Shopped”
The phone rings. “Carter and Company, this is Nick.”
“Hello,” the caller avoids pleasantries and gets right to business, “I’m trying to get quotes for…”
Calls that begin this way may invoke excitement for salesmen, but it’s a frightful indicator of a commoditized market. Last week, we looked at how customer perception is the primary factor that drives once-vibrant and profitable markets into the doldrums of price-warring competition. This week, we’ll focus on changing those perceptions and generating leads interested in your sharp mind more than your sharp pencil.
Innovation by differentiation
Distinguishing your product or service from those offered by the competition is primarily a function of marketing. Consider Starbucks, which charges considerably more for a cup of coffee than the rest of the industry. How is this elevated price accepted by the customer? Think package design, product styling, and customer experience. Starbucks hangs pendent lights over their bar and features local artists on their walls to create an environment favorable to positive customer experiences.
In high-tech markets where retail visits are rare, the sales approach itself can also be a marketing tool. For example, deliver “proposals” to potential clients instead of quotes. This allows for elaboration of the standard features of your solution sale.
Innovation by addition
The simplest method of offering a “solution” sale is to bundle services or auxiliary products with a commoditized product. Tech support and training, for example, are add-on services which are commonly offered. General Motors has effectively achieved innovation by adding On-Star to many of its vehicles.
Innovation by innovation
Finally, there is innovation by innovation alone. Companies like Apple redefine common products all the time. Their business approach results in products priced higher than comparable products and their sales are not affected. Similarly, you might recall when Autodesk realized their need for this type of innovation in the mid-90’s. Although AutoCAD had been their flagship for over 20 years, they expanded their product line through acquisition and spawned a new era of growth for the company.
Regardless of the strategy for avoiding commoditization, for manufacturers and suppliers, the desired result is the same. When a consumer perceives your product or service as beyond compare in its total offering, they won’t have the luxury of shopping it around. If you want to restore your profit margins to the levels they once had, you must dare to be un-shopped.
The phone rings. “Carter and Company, this is Nick.”
“Hello,” the caller avoids pleasantries and gets right to business, “I’m trying to get quotes for…”
Calls that begin this way may invoke excitement for salesmen, but it’s a frightful indicator of a commoditized market. Last week, we looked at how customer perception is the primary factor that drives once-vibrant and profitable markets into the doldrums of price-warring competition. This week, we’ll focus on changing those perceptions and generating leads interested in your sharp mind more than your sharp pencil.
Innovation by differentiation
Distinguishing your product or service from those offered by the competition is primarily a function of marketing. Consider Starbucks, which charges considerably more for a cup of coffee than the rest of the industry. How is this elevated price accepted by the customer? Think package design, product styling, and customer experience. Starbucks hangs pendent lights over their bar and features local artists on their walls to create an environment favorable to positive customer experiences.
In high-tech markets where retail visits are rare, the sales approach itself can also be a marketing tool. For example, deliver “proposals” to potential clients instead of quotes. This allows for elaboration of the standard features of your solution sale.
Innovation by addition
The simplest method of offering a “solution” sale is to bundle services or auxiliary products with a commoditized product. Tech support and training, for example, are add-on services which are commonly offered. General Motors has effectively achieved innovation by adding On-Star to many of its vehicles.
Innovation by innovation
Finally, there is innovation by innovation alone. Companies like Apple redefine common products all the time. Their business approach results in products priced higher than comparable products and their sales are not affected. Similarly, you might recall when Autodesk realized their need for this type of innovation in the mid-90’s. Although AutoCAD had been their flagship for over 20 years, they expanded their product line through acquisition and spawned a new era of growth for the company.
Regardless of the strategy for avoiding commoditization, for manufacturers and suppliers, the desired result is the same. When a consumer perceives your product or service as beyond compare in its total offering, they won’t have the luxury of shopping it around. If you want to restore your profit margins to the levels they once had, you must dare to be un-shopped.
Labels: Apple, Autodesk, commoditization, differentiation, innovation, sales, Starbucks
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