How to avoid becoming a commodity

Buyers don’t commoditise suppliers. We do that to ourselves, by not giving them the criteria to make a better choice.

Warren Buffet once said that “price is what you pay, value is what you get”. While it’s a simple idea on the surface, there’s a lot to this concept of value.

Price is easy to understand, which is probably why we default to it so often. “Value” is much harder.  Value is both a subjective and objective concept. It exists in tangible and intangible form.

Value is like a snowflake – no two people see value in exactly the same way.

What creates value for me probably won’t represent value for you. That’s because we have different hopes, dreams, goals and problems to solve.

Acccording to the Harvard Business Review, value in business markets is the worth in monetary terms of the technical, economic, service, and social benefits a (business) customer receives in exchange for the price it pays for (your) market offering. The HBR authors, James C. Anderson and James A. Narus, point out that these same customers are increasingly looking to their purchasing or procurement departments as a way to increase profits, and therefore will pressure suppliers to reduce prices. (No surprises there).

So, they argue, if we are to have any hope of getting our customers to think about total costs rather than simply the cost of acquisition, it’s essential to have an accurate understanding of what our customers value now, and would value in the future. 

Because of this, I reckon the way we run new business pursuits is completely wrong. We wait until customers tell us what they want, and then, like everyone else, try to give it to them – for the lowest price. And all the while, we know there is a better solution for the customer – if only we could crack the commercial value that will make them sit up and take notice.

A recent study on sales execution trends by Qvidian found that only 63% of salespeople actually make their targets, with pursuits ending in “no decision” the major reason for the shortfall. While four in 10 salespeople thought that an “inability to effectively communicate value” might be behind their lack of success, only half of them also chose this as a skill they needed to work on.

Understanding what customers truly value is the only way to combat price pressure, and to avoid becoming a commodity.

There is thought and work involved – certainly more than sitting and waiting for a tender to cross your desk – but it’s the most worthwhile work you will ever do.

Robyn Haydon is a business development consultant specialising in business that is won through competitive bids and tenders. Her clients have won and retained hundreds of millions of dollars worth of business with many of Australia’s largest corporate and government buyers.

Had a tough year? Missed out on business you really wanted? Let’s make sure 2016 is different. The Pole Position program will position you to win the opportunities on your radar for next year. Email info@robynhaydon.com or call 03 9557 4585 to find out more.