What would you guess is the question we ask our brand new clients that most often leaves them completely stumped?
What makes you different?
That’s it. What makes you different? It should be an immediate, well-thought-out answer, but it’s not 90% of the time. And the reason it’s such a problem is that so many companies – especially those selling products B2B – have spent so many years with a product-based mindset, they’ve effectively commoditized themselves. Then, when the inevitable copycat provider comes along with a nearly identical product at 2/3 the price, what can they say?
Frankly, if your customer can look at a competitor’s product and see it as identical, you’re not doing your job. And if you look at the same product and see it as identical, you should be ashamed of yourself.
How a product-based mindset compresses margin
Here’s the standard situation these legacy companies face:
They’ve been selling widgets to Customer A for over 20 years now. Over that time, the widget itself has remained basically the same, but to keep the customer happy and boost value, they’ve gradually added on numerous support services, technical help, and other value added benefits to go with their fairly standard widget.
Suddenly, a competitor from overseas approaches Customer A with an identical product they call the gidget. It does everything the widget does, but at 2/3 the price. Procurement jumps on the opportunity and runs a trial. Finding that the gidget does indeed serve their purposes, they tally up the price difference and make the obvious decision.
Presented with this situation, the original company has two choices: slash their margin to try to match the competitor’s price and maintain their volume, or lose Customer A completely. Given those two choices, it’s obvious which one every company is going to choose.
A third choice most companies overlook
But there’s another option that most companies seem to miss. Especially when dealing with a customer with whom you have a long-standing relationship, there are almost certainly aspects of the current arrangement that your new competitor is in no position to match. All those value added services you’ve provided over the years have become expected by the customer, and they may not even realize what they’ll be losing by going with the less expensive option.
Of course, you can’t inform them of this if you don’t even know about it yourself. Which brings us back to the question of what makes you different?
Rather than viewing competition coming in with a cheap copycat product as an all-or-nothing price war, view it as an opportunity to point out all the reasons your product and support services are worth more than theirs.
In some cases, this will be simple and obvious, while in others it will be more challenging. But it’s nearly always possible.
And if there truly is no choice but to sacrifice price to maintain volume, identify which specific segment of the customer’s volume this truly pertains to instead of assuming it’s all of it. Then, figure out a way to make more on volume just in that segment, while continuing to maintain a higher price and greater value elsewhere.
So, how would you answer?
What makes you different?
If you’re not sure, you’d better discuss it with an expert.
