Staying on the theme of product differentiation that we introduced last week, there’s another aspect to the issue that also creates challenges for many B2B companies that have been working to protect their volume for years.
As we discussed last week, if you’re manufacturing the proverbial widget – a product that’s fairly easy to copy or replace – over a product’s lifetime, the introduction of “same as” competitors and look-alike products are naturally going to occur. Most companies, if they’re really not willing or able to change the product itself, will augment the product with value-added services that will help them protect volume because the customer gets more for their money.
Of course, same-as competitors are likely to mimic this action every time, so it’s really just a Band-Aid in the long run. The more services you tack onto the initial product purchase, the more your margin is compressed. Eventually, it becomes a losing proposition: you just can’t afford to keep piling on the services to maintain the product sales volume.
Segmentation and Differentiation
A more sustainable strategy – and one your competition will have a harder time copying – is to slice and dice your customer base into various segments based on how they benefit from all of your value added services.
In other words, just offering all services to all customers is too expensive and won’t be sustainable. But offering the right services to the right customers at the right time will be far easier, more affordable, and more effective.
Doing so won’t necessarily be a simple process. You’ll need to dig down deep to discover specific customer pain points and unique conditions in the customer’s circumstances that lend themselves to a particular combination of product features and value added services. But once you hit that nail on the head, your product/service combination suddenly becomes far more valuable to that specific customer than your competitor’s offer!
The end result: pressure on margin eases off and volume is saved, for the right customers.
Will you lose some customers this way?
Perhaps.
But, in the long run, those customers who go with the competition aren’t the best customers for you any way. So, as long as you address this issue early enough that you’re not in a position of desperation, you end up with the best of both worlds: great customers who love your products and services even more, and less of the customers who were dragging you down.
If you’d like to discuss how to put this into action in your own circumstances, contact us today to discuss our proprietary Integrated Commercial Strategy.
