B2B Street Fighting Blog

value: the great commodity buster

Posted by Marie Dudek Brown on Thu, Jan 24, 2013 @ 03:41 PM

value the great commodity bSometimes a few of your products or services - when compared at the product feature/benefit level - might actually be commodities.  So what do you do then?  Fortunately, when you look at the total business relationship (not just a piece of it) between your firm and the customer, this commodity problem usually goes away.

Let's say, for example, there are two medical device companies, both selling stents.  It's easy for the hospital buyer to approach the negotiation saying, "Your stent is the same as the competitors."  This might be true, but when the negotiation is viewed as the sum of all things that are or could be exchanged as a part of this transaction versus simply as a commodity parts buy, value can usually be created.  For example, one supplier may bundle in other products or services, provide better training or support or include some form of data exchange between the hospital and supplier that is critical to using the product or complying with regulations.  In other words, the product at the heart of this negotiation is a commodity but only until viewed in the context of the supplier's total value proposition.

In another example, let's say you are a medical services distributor and your company offers true commodities like rubber gloves, caps and gowns.  In addition to selling these items in bulk from your warehouse, you also offer services such as business process consulting and just-in-time inventory practices.  Rather than see the business process consultants and just-in-time inventory services as sideline businesses or as existing in a vacuum, consider them as a part of the total picture and you'll soon see they are no longer commodities - to you or your customer.

Viewing supplier companies side-by-side, to see which provides better wrap-around services and support, etc., often reveals a differential that clearly separates the product offerings.  Value, then, must be mapped against this customer's needs and viewed from the perspective of the total ecosystem.

Now, if you look at the total relationship between your firm and your customer and it is, in fact, exactly the same as your competitor's relationship, then you don't have a negotiation problem, you have a non-existent value proposition.  For now, we will assume there is some value in what you offer, whether that value is inherent in the product features or design, the ecosystem your company can offer (services, support, delivery times, etc.) or the relationship you bring to the table.

The bottom line?  Expect buyers to attempt to commoditize; it's what they're paid to do.  And it's the job of the B2B street fighter to combat commoditization at all costs.  You must be able to articulate value; it's the only thing that will take the pressure off of price and keep the deal from being reduced to a price war over a commodity product or service.

Tags: negotiation skills for sales

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