How to Win Deals in a Commoditized Market
When I was a kid, I used to love to race slot cars. For those not familiar with them, slot cars were toy cars that ran on a slotted track with electricity transferred to the cars through small rails on the track. You could assemble your track anyway you wanted, but there would always be two racers whose cars ran in their respective slots. Racers controlled the car's speed with a hand-held trigger that allowed you to increase or decrease the speed. There was no steering--that was the job of the slots to direct the car. Too fast, you fly off the track. Too slow, you don't move or you lose to the other racer.
In a way, it is the perfect metaphor to the world of commoditized sales. After all, each racer was dealing with the same car, the same track, the same controls, the same power source, and the same slots.
To take that metaphor a step further, you can even imagine that the slots are the customer's parameters, which are set in advance. The track is the process that you follow for bidding. Often the power is the same if you consider that sourcing for all of the competitors for key materials is the same. So, what makes the difference in such a controlled environment?
Winners triumph because of three things:
- They know the track -Every industry's marketplace is unique. Whether it is because of manufacturers, materials, competitors, supply gaps, or some other element, there are strengths and weaknesses to be leveraged. Recently I was working with a company in a highly commoditized market. The market's growth rate for their product was four percent, but they were growing at more than 11 percent for several years. Why? They were leveraging international currency fluctuations in their supply chain to gain price advantages, locking up large contracts based upon their ability to serve hard-to-reach locations in their customer's operations, and keeping enough inventory to guarantee rapid delivery. The strategy of the track was more important to this company than the speed of the race car. Put another way, they played the track to their advantage.
- They know how to handle the little things--What makes your car faster in the race on the track is actually how you handle the curves, not the straight-aways. Slowing down just enough to not flip off the track and accelerating quickly enough to gain just a little more advantage than your competitor on the exit of each turn determines the winner. In business, this means looking for the openings in the market, mistakes of the competitor, or changes in the customers. A printing company I worked with won a lot of government work on bid. I asked the CEO how he won so often, expecting his secret to be efficiencies in production or other major operational components. Instead, it was relatively minor things--change-orders and paper pricing. These two small components that impacted his commodity price for the bid, yet preserved his margin, are what allowed him to win.
- They remain vigilant--If you can recall playing slot racers from your youth, you may remember the level of focus required. You could not look away because the cars moved so fast and there were so many turns that if you were at the wrong speed you would get passed or thrown off the track. To win in commodity sales requires a similar hyper-vigilance on all of the items described above. The market moves very quickly and to win in the market is to triumph in lots of small moves throughout the race. They pile up and give you the big win.
No one really wants to be in a commoditized business. It's hard work and your unique value propositions are disregarded by your customers quickly. However, if you are in that world, you can still win. You just have to play a lot harder.