[A typical conversation between seller and buyer]
“Hi Gianluca, what products do you manufacture?”
“What are your prices?”
“These: X Euro/m, Y Euro/m Z Euro/m”
“What a shame! You’re expensive. I’m not interested!”
[End of conversation]
If my conversations with customers were to end like this I would definitely not get more customers or worse still I would never have had any.
This is particularly so if a large part of the value of the products is linked to commodities in the strictest sense such as oil, copper, gold, or foodstuffs.
So how can we solve the problem or at least make the customer understand that our product, albeit very close to being a commodity, is in some way different?
Well! You need to differentiate the product itself, by adding services and thus adding value, making it unique by making it available in an exclusive way or by making it part of an exclusive niche.
Let me give you an example; I have a friend who for a long time has been working in the distribution of varnishes and paints for residential use and specifically anti-mold paints! Who are his competitors? Why the big malls that buy big quantities at really low prices and that can compete with all the small shops that sell paints locally. What are paints if not commodities, or something very similar?
Giuseppe, which is his name, created a new brand, his exclusive brand, with his own brand name, “Basta Muffa” or “No more Mould”, using special branding that he created and designed himself, a brand that competes on an equal footing, and is winning, against the great giants of organized distribution.
It’s a bit like if we were to create our “NO MORE LEADS!” and sell them through other channels, our channels, in competition with the giants who produce and sell these leads below cost.
But how do we add value or service to a product like ours? There are many ways of differentiating and branding, and for this reason, I recommend that you read a book that is now a classic of marketing, ‘Competitive Advantage’ by Michael Porter in which he discusses the value chain. As you read it, at least as a manual because there are more than 500 pages, you’ll see that there are two approaches you can take with your business, price leadership or differentiation.
Price leadership! I strongly advise you against this unless you are a giant like Amazon or an Asian producer; Amazon for example, in addition to low prices and therefore cost leadership, has added countless services, even inventing years ago a new way of creating value, Amazon PRIME, and by adding to it a host of other services. (hence leadership + differentiation)
If you take this route, however, I recommend that you pay close attention to your numbers because if you do not carry it out in a scientific way it creates a Kreislauf that will soon lead you to trivialization and “re-commodification” and finally bankruptcy.
Differentiation, on the other hand, is the way you have to go in your sector and in our sector, that of industrial cable production, it is an absolute MUST. Differentiation can take place in a variety of ways, over time, in space, in value, through the addition of priority and exclusive services, by participating in training seminars, bundling deals, etc. those other competitors do not even dream of developing and bringing to fruition.
But we will talk about differentiation in future articles because this is the only way to survive in our industry.