- Blog post
When buyers try to commoditize what you’re selling
If you’re very, very lucky, you may sell a product or service that is completely unique, without any serious competitor in sight. And because your offering is one-of-a-kind, you never feel any pressure from buyers to lower your price.
But most likely, you do have competitors, maybe a lot of them, and your customers do sometimes try to beat you down on price. They may not put it in so many words, but they like to think your product is a commodity that they can easily get elsewhere — especially in light of all the online resources buyers have these days.
The problem comes when you start to believe them. “My product is a commodity,” your inner sales demon whispers in your ear. “All I can do to get the sale is give way on price.”
But that’s a copout. There’s always a differentiator you can use to show customers they need what you, and only you, are selling.
It’s never just the product
When you look at it closely, you’re never selling just a “product.” You’re selling everything that goes with it, including your efficiency, ease-of-delivery, after-sale service – and last but far from least, your own expert advice. These elements all have value, and buyers are willing to pay for it.
In a classic article about product differentiation, marketing guru Theodore Levitt wrote, “To the potential buyer, a product is a complex cluster of value satisfactions.”
However, salespeople tend to differentiate based on product quality, performance and cost. These “value satisfaction” features are relatively easy to replicate, allowing buyers to play the commodity card. But research conducted over three decades by the management consultancy Bain & Co. reveals a source of value satisfaction that’s often overlooked – the salesperson’s responsiveness, expertise and commitment. Bain found that for buyers, these factors are highly valued and can be used to differentiate what might otherwise look like a commodity.
Imagine you’re selling doors. You have a potential buyer who is a builder and is putting up a new housing development. Obviously, he needs a lot of doors.
Will you cut your price?
The prospect says your main competitor, who sells doors of similar quality, agreed to cut her price by 15% to get this big deal. Will you match that price, he asks.
Moment of truth. You could cave. But if your brain isn’t occupied by the commodity copout, you have enough bandwidth to remember that the rival company’s closest warehouse is 800 miles away. You point out that this could mean late delivery, which would cost your prospect plenty as subcontractors wait around for something to do.
He counters that the competitor has pledged to deliver their doors at least a week early. You ask where the buyer will store them. He says he’ll rent storage locally. That’s a cost, too, you note, and his crews are going to have to handle the product twice – once when it arrives and then later to move it to various sites.
Your warehouse is nearby. You can deliver just in time and your buyer won’t risk incurring any of the costs that could arise with the competing offer. In fact, when you factor in all those costs, you’re less expensive even without cutting your price.
The buyer is impressed. He asks for a couple of days to reflect, then calls you back with the good news that you got the deal.
It’s all about you
What differentiator or differentiators have you just brought into play? Reduced risk, lower potential cost, and convenient delivery. But above all of these, there’s you. You’re the one who had the knowledge and experience to surround your product – a plain ol’ door – with a value bundle that distinguished you from the competition. And won the sale, without resorting to a price cut.
In summary, remember these three points:
- Don’t fall victim to the illusion that your product is a commodity. When you do, you give buyers price leverage
- Control the dialogue by asking questions to learn what customers value most, and
- Make yourself – specifically, the expertise you bring to every sale – the key differentiator. That’s a benefit your competitors can very rarely match!
This blog entry is adapted from the Rapid Learning module “The Commodity Copout — How to Differentiate Your Product Without Cutting Price. ” If you’re a Rapid Learning customer, you can watch the video here. If you’re not, but would like to see this video (or any of our other programs), request a demo and we’ll get you access.
The blog post and Rapid Learning video module are based on the following articles:
Levitt, T. (1980) Marketing success through differentiation – of anything. Harvard Business Review, Jan.-Feb. 1980, 83-91.
Almquist, E., et al. (2018) The B2B elements of value. Harvard Business Review, March-April 2018.