Value, not just price.

    Commodity markets have two things in common:

  1. There is plenty of business to go around, that is why it is a commodity market. In a mature, saturated market, the challenge is to attract some of the business that is around, not build a new market.
  2. Customers focus aggressively on price, usually because none of the suppliers in the market give them a reason to focus on anything else, and it is an easy common denominator.
  3. Finding a sustainable point of differentiation is never easy, if it was, everyone would be doing it.  The starting point is to understand what the commodity you sell is used for, understand how the product adds value to the customer, and restructure the offering around the source of value.

    For example, hiring a car is an exercise in price comparison and the convenience of pick-up and drop-off, not much else. A hirer wants a car to give them mobility, flexibility, and economy of time, and money (compared to taxis). Why doesn’t someone charge by the Km after a small base charge to cover insurance and availability. Suddenly, the game is changed! Same with car insurance, we all pay the same differentiated only by the age and location of the driver, and type of car, but cars are about offering mobility, and logically the more you drive, the greater the chance of a claim, so charge by the Km driven after a small  base charge to acknowledge the other variables. What about advertising, why not charge by the response, putting some responsibility on the medium to deliver what it promises, even something as basic as printing services, differential pricing based on turnaround times, response rates (even for printed leaflets, brochures, and so on) is possible.

    When you charge for the value delivered, as seen by the customer, rather than just the production, the market loses the second of the characteristics noted above, and differentiation has emerged.

     

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
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