Don't be a Victim of Commoditization
BY Jeff Thull
Understanding the three reasons for commoditization will help you provide value to your customers.
Company executives and their teams are struggling with differentiating their complex business solutions in this highly competitive and complex market. Simultaneously, customers are putting a squeeze on margins by driving buying decisions down to the lowest common denominator -- price.
How is this happening? Why is this trend increasing at an alarming rate? How can you hold your price and get paid for the value you create?
Let's start by taking a hard look at the three driving forces of commoditization'Šadvances in technology, difficulty connecting value to the customers' business drivers, and pressure on buyers to make decisions when the problem to be solved, and solutions offered, are not clearly understood.
Companies are constantly seeking differentiation by upping the ante in technological advances; but this can be problematic if that differentiation exceeds the needs and understanding of your customers. If your customers can't comprehend or measure your value, they will respond by ignoring what could be very valuable to them and focusing on what they do understand'Šprice, and there goes the downward spiral to commoditization.
As technology advances, so does the difficulty for buyers to make quality business decisions. Can your customer truly understand and differentiate the unique value of your solution and how it impacts their business? Even more critically, do they understand the cost of their problem in the absence of your solution?
So, if you truly have a unique and valuable solution, how can you get paid for the value you create?
First, get your mindset straight. Understand that we are clearly in a new era of selling. Today's market requires that organizations transform their approach from "purveyors of products" to "diagnostic business advisors" -- a role you will want to emulate.
Second, help customers connect your value to their business drivers. Customers are also expecting suppliers to add value at much deeper levels than what was traditionally delivered to their organizations. Historically, we presented our products and customers connected the value to their business. Today, successful sales professionals are actively guiding those connections.
Look at how the absence of your value is affecting each individual involved in, or influencing, the decision to buy. With each individual, identify and quantify the impact on their business, or job responsibility, in financial terms. As you bring this level of clarity to your customer, you will have established the foundation of a valuable relationship.
Third, develop skills to communicate at a business acumen and strategic level. The customer's desire is to build tighter bonds with fewer vendors. They also want to work with professionals that they consider "contributors" to their success. Both are an advantage to skilled professionals and as a contributor, you will gain access to key individuals and be able to build your business case.
The majority of decisions -- quality decisions -- are the result of a consensus-building process. It is your responsibility to connect your company's unique value to each individual in the context of his or her job responsibilities and their personal agendas. By the time you have had the right conversations with the right people, you will have differentiated yourself and your solution's value, and it is unlikely that it can be challenged by a competitor.
We tend not to see the world through our customers' eyes, but when we do, we find that they face many problems. Their business environments are more competitive and technological advances are radically altering their industries and markets. There is no margin for error, but the pressure to succeed is stronger than before.
The reality is'Šour customers need help. They need help understanding the problems they face; they need help designing the optimal solutions to those problems; and they need help buying, implementing, and measuring the value of those solutions. It is your responsibility to advise your customers, give them a process to make quality decisions, and help them succeed. Put a stop to commoditization, be a contributor to your customers' success, and get paid for the value you create.