3 Ways to Increase Your Profit & NOT Sell on Price

It’s often assumed, even by seasoned executives, that when businesses sell goods to one another, especially in b2b commodity markets, that it all comes down to price.

This is exacerbated by the welter of product information now available online. Customers often decide what they want from a supplier before they even sit down with a sales rep. And this has led reps, itching to do a deal, haggling over price and pitting their firm on a “race to the bottom” against competitors.

Push Back on a Price War

But it doesn’t have to be this way. B2B International data gathered over the past two decades shows only 20% of b2b customers prioritize price over all other issues; a huge 80% look for more from their suppliers. Even in such commoditised sectors as utilities, fewer than half of buyers prioritize price.

Marketers, therefore, must learn to push back on stressed salespeople trying to close deals, and a corporate culture that supports a short-term profit led approach. Three tactics will help their company sell products based on the value they provide, rather than the price they command: differentiating the company from competitors by branding, making customer experience central to all decisions, and working consistently on product development.

None of the three are quick fixes, but that’s not a bad thing. Moving an entire company from a price to a value focus is a big undertaking, and requires a multi-year commitment from the CEO down.

Three Steps to Take

There is hope, however. We see lots of evidence from our clients that with the right focus and commitment, growth and differentiation is possible without selling on price.

Differentiation through the brand: A quick glance at the 30% price premium Coca-Cola and Pepsi enjoy over competitors should be enough to persuade anyone of a brand’s value. B2B branding is just as important – think Cemex, AkzoNobel and KPMG to name a few. Don’t forget that business customers are also consumers, and will use a brand’s promise to identify and gauge business products and services.

Although half of b2b businesses say they focus on branding, according to B2B International data, only 37% regularly check their brand’s health. Firms competing on value should frequently assess how familiar the market is with their brand, that customers see the brand as standing for something distinct and better than competitors, and that all interactions between customer and company deliver on the promise made by the brand.

Customer experience: Creating a high quality and consistent customer experience requires managers to understand the journey customers take from first contact with the firm (likely online) all the way to renewing a contract.

All operations – the organisational structure, IT systems, supply chain management, employee performance management and so on – should then be designed with the primary goal of making the customer experience as seamless and effortless as possible. Although 50% of companies say they’re working on this, far fewer are making progress: only 28% rate their customer journey mapping as “excellent”, for example.

Product development: It’s vital for all companies to maintain a fresh and relevant product portfolio. It helps to ensure that at least 30% of your product or service offerings have been developed within the past five years.

But product launches are tricky. B2B International data shows that although 52% of firms say product development is their main priority, 57% cite it as their toughest challenge. Firms should focus less on dreaming up new ideas and more on eliminating the failures, and then turning the remainder into concepts that can be tested in realistic conditions. And remember, innovation doesn’t always need to be about products; it can be about service and the way you do things (often internal business processes).

Originally published in ‘The Insight Economy’ report in The Times 24.5.2017