How to Combat Being a Commodity

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Do your customers keep pressuring you to reduce prices by saying that they are getting more favourable terms from your competitor? It is in the buyer’s best interest to convince you that what you provide is a commodity. That way, they transfer more profit margin from your company to their’s.

Is what you provide really a commodity? Perhaps to some extent, however your company likely offers a bunch of value-added features to your customers, and they are willing to pay for it, but will take it for free if you give it away.

Purchasing agents get considerably more training than sales people. There are more professionally trained buyers than professionally trained sales people. And so the sales people can get slaughtered in negotiations, coughing up concessions and getting little in return.

Action items to justify value:

  1. List all the features and benefits your company offers, that provide some value to your customer. These may include convenient location, no charge freight, expedited shipping, smaller order minimums, onsite merchandisers, consignment stock, informative sales people, helpful customer service, accurate billing and credits, flexible payment terms, industry leading products, in store point of sale displays, large selection, etc.
  2. Determine which customers value these features and benefits the most. If your customer doesn’t value something you offer, you have a choice: Find customers who do value it; or stop offering it and reduce cost.
  3. Communicate the Value: Sales people need to be able to articulate the value proposition to the customer and ask great questions that build the desire of the customer to want those value elements.

What if your competitor gives it away for free? If your competitor gives it away, chances are they are making it up with margin or volume or have found a way to offer the benefit without incurring cost. Or they may have given it away because everyone else was. That doesn’t mean that you have to.