It has long been known that the most common way of competition in almost any market is price competition.
Many studies have been conducted that analyzed the business processes of a variety of companies. Among answers to the question of what is important for a decision-maker when choosing a product or service, almost 90% of respondents named price as the main criterion.
Let’s look at an example. The person has decided to diversify his life and wants to start playing at an online casino. Using Google, he will find a myriad of casinos, begin to compare and compile his top institutions. Say at the top of the charts was a CasinoChan because it has more favorable bonuses, wagering options, better coefficients on slot machines. Consequently, the question of the price will be decisive.
However, quite often a company finds itself in a difficult situation: competitors are actively dumping, and it is impossible to reduce the price of products for various reasons. Such a situation, if no action is taken, carries the risk of the company leaving a certain product segment of the market, or the market itself. True, the situation is complicated only at first glance. For its successful exit, there are marketing strategies, the essence of which boils down to the allocation of any benefits of the product, not related to the price, and the organization of sales at the expense of them.
When the Client Cares About the Non-Price Features of the Product
We are looking for the segments of the market where the non-price qualities of the product are very important for the potential client.
Our research shows that product quality and delivery terms are the second and third most important for the customer on B2B markets after price. And that means they can be taken as a basis for developing new competitive strategies.
Let’s take delivery time as an example. The segment of the market where it matters to the customer may be right next door – for example, companies that resell products. Their business reputation directly depends on compliance with the stated deadlines for delivery to the end consumer. Therefore, when choosing suppliers, they cannot be guided only by the price and are willing to buy goods in the first place from the one who does not fail them on time.
Even if such goods are more expensive than competitors in the market. In this case, the quality of the product is of the least concern for them, because their task is only to buy in one place and sell in another with a profit.
Exactly the term of delivery is also tied to companies whose business is based on government contracts, as a late performance of such a contract may lead to fines, sometimes comparable to its cost, or to being blacklisted as unreliable contractors.
Quality as the Main Criterion of Choice
There are segments where, on the contrary, product quality is the first priority in the selection process. The business of one of our clients, a manufacturer of industrial wheels and castors, was very successful until the market was flooded with cheap analogs from China.
The company did not want to go into price dumping, as it meant an inevitable decrease in product quality. Our market research showed that at least 50% of the demand for industrial wheels and castors is generated by manufacturers of complex equipment, where wheels or castors are inherent in the design. For example, a factory that manufactures an ultrasound machine. It is a complex and very expensive device that moves in space on wheels. And here China is not an option, because the wheel should be of high quality.
The manufacturer of the device is well aware: if the wheel will fail, the ultrasound machine rolled on its side, and breaks, it will get complaints from the buyer, but not a firm that produces consumables.
Similarly, manufacturers of scaffolding, storage carts, and various production equipment have become the target audience of the company. Here, the breakdown of even one wheel can quickly turn into an industrial injury or other disasters, leading to loss of reputation, lawsuits, and fines.
Using the Lead Magnet
What if the product a competitor sells is of high quality (at least enough to satisfy the customer), delivered quickly, but still sells cheaper than yours? In such a situation, it is possible to compete successfully without dumping, using the lead magnet marketing technology. Its essence can be easily explained by a simple example.
An Example of Using Lead Marketing
Among our customers was a company that sold product X. It cost the same as the competitors. Like them, our customer’s shipping was included in the price. Reducing the price itself was not possible, so as not to lose the margin.
And then the solution arose: in the price list a separate line the company prescribed the cost of delivery, equal to zero. This imaginary free delivery is a lead magnet. Something for which the product will buy, even if it is equal in price or more expensive than similar goods from a competitor.
Justify the High Price of Goods to the Customer
Customer needs to prove – the purchase of your product will be beneficial to him, even if the product itself is obviously (sometimes several times) more expensive than competitors. There are several ways of such proof:
- Show the risks the customer will avoid with your product. For example, what it will cost him to repair his device if he buys lower quality but cheaper components from a competitor.
- Show the price of ownership. This is a fairly old, but still effective sales technique. Show how much money a customer will earn per year by purchasing your particular product.
So, one of our clients, a producer of composite materials, showed the customer, a cable manufacturer, how with the help of his product (a kilogram of offered materials was twice more expensive than the market average) the volume of cable production could be increased by several times. And so, to earn several times more. Here, the purchase price for the customer ceases to play a significant role.
A similar example: installation of transport and fuel consumption monitoring systems. Another customer of ours equips customer fleets with such systems. The cost of installing the system can go up to several million. But this amount is not commensurate with the savings that come from reducing fuel consumption, eliminating vehicle downtime, etc.
- Visually demonstrate the benefits of your product to the customer. There is no problem with the benefits when the customer’s employee, who makes the purchasing decision, is a subject-matter expert and can assess them. But if he is not, it is better to show the benefits – and not on paper.
For example, you can make a video presentation or develop a booth where you can test your product in front of anyone (e.g. at an exhibition). Or produce a product sample you can give to the customer for testing.
The already mentioned manufacturer of composite materials did exactly that: the company produced a blade from its materials, and the customer in his laboratory could test it for fire resistance, stretching, fracture, and the effect of other damaging factors, to ultimately make sure of the high quality of the proposed product.
So, by correctly applying these strategies, depending on the product and the market, you can easily enough to increase sales and beat the competition without reducing prices. But it’s best to think first – is it really impossible to reduce the price? Sometimes the feeling that a product cannot be sold cheaper is imaginary. The manufacturer knows many of its merits, but it is necessary to analyze whether the potential customer shares this position?