by Mark Eardley. If you take a random selection of B2B companies competing in the same market, they all look pretty much like clones of one another. Similar products, similar services, similar propositions. Very similar. It may have been an entertaining concept in The Matrix, but looking like a clone in the real world is a formidable barrier for any company that wants more sales at stronger margins. If you’re a clone, a low price is the only competitive advantage you have.
Back in 2000, American marketing consultant, Jack Trout, put this truism even more bluntly. He said that, to survive in a world of ‘killer competition’, you can either distinguish yourself from your competitors or offer the lowest price.
In Trout’s view, if you can’t consistently meet that compulsory low-price imperative, then you must either “differentiate or die”.
Blunt enough? Yet so many B2B marketers still don’t get it. Maybe they need to think about it like this. From a customer’s perspective — the only one that matters — if all the available offerings look as if they come from the same ‘world-class, market-leading mould’, how can customers decide which one to buy? Simple. They use price as the differentiator. They buy the cheapest. What else are they supposed to do?
B2B clones: caught in the commodity trap
In globalised markets where customers may source products from Bulgaria to Brazil, there is a growing similarity between the features and specifications of even the most-sophisticated products and services. Increasingly, they’re regarded by customers as being no more distinct than basic goods such as plastic bags or paper cups.
When customers are allowed — yes, allowed — to see products and services as being essentially the same — as commodities — they obviously look for the lowest price. For undifferentiated companies, this means suffering the inevitable damage caused by being forced to sell on price: deals either get done at painfully low margins or get lost to fractionally cheaper competitors. Multimillion-buck contracts certainly do get lost over relatively tiny amounts. That’s the commodity trap in action.
Marketing usually sets the trap
Rather perversely, it’s often the marketing function that sets the trap in the first place. This is sprung when companies praise themselves instead of promoting what they do for customers, when it’s all about ‘We’ the company and very little about ‘You’ the customer. By continuing to bang on about the same self-obsessed subjects as their competitors (lists of corporate status symbols and product features), these companies run straight into a commodity trap that puts constant downward pressure upon their pricing.
In this game of clones, how may a B2B company differentiate itself and avoid being continually snared by lower prices and lower margins? The answer is surprisingly straightforward and is rooted in the most basic rules of B2B marketing.
Provide ‘evidence of difference’: purpose, process and promise
We are all different. Just as no two individuals are the same, no two companies are the same.
To produce higher margins from premium prices, companies must first provide customers with evidence that demonstrates how they are different. The evidence must then prove why the differences are relevant to customers and why they justify premium pricing.
To uncover the evidence of difference, companies may start by answering three questions that are the foundations for all B2B marcoms:
- Purpose: What do you do?
- Process: How do you do it?
- Promise: Why do you matter to me — the customer?
Stating the obvious
It might be stating the obvious, but I’ll state it anyway: the questions need to be answered from a customer’s perspective
For example, in terms of “purpose” and “process”, if you’ve been in business for a hundred years, so what? What’s the relevance of your manufacturing facilities, systems, or quality controls? Why does your skills-base and sector experience matter? What’s the significance of your stockholding? Where’s the value in your after-sales support?
As far as “promise” is concerned, unless you can prove to them how it contributes directly to their success, customers don’t give two hoots if you were founded in the year dot, where you’re listed, how many people you employ, or the size of your turnover. They don’t care if you have ultra-modern factories, run Kanban systems, are ISO-whatever certified, hire the top talent, operate extensively in their sector, hold big inventories, or provide nationwide 24/7 service.
Prove why all of this matters
Without compelling evidence that proves why all of this matters to customers, none of it matters. So, why allow your marketing department to keep on promoting it? If customers can’t clearly see how your business advances their business, they certainly won’t pay a premium for your products and services. When they know no better, customers will buy from the cheapest clone. And who can blame them?
Mark Eardley advises B2B companies on how to govern their marketing to attract and retain profitable customers; several of his clients have grown to become market leaders. He is the author, together with Charlie Stewart, of Business-to-Business Marketing: A Step-by-Step Guide (Penguin Random House), which offers practical, actionable advice on how to make marketing make money. Find him on LinkedIn.
“Motive” is a by-invitation-only column on MarkLives.com. Contributors are picked by the editors but generally don’t form part of our regular columnist lineup, unless the topic is off-column.