Meeting customers' needs is central to achieving customer satisfaction. But beware mistaking "want" for "need". Your customers will say they 'want' lower prices. The problem is that many suppliers assume that they must compete on price to keep the business. They drop the price and cut their own margins but don't necessarily keep the customer. If you actually ask customers why they choose you as a supplier and how your company helps them to achieve their objectives, then you may be surprised to learn that there are other factors at play, and that you have other options.
Here are two examples of organisations that cottoned-on to the fact that customers weren't necessarily driven by price.
In the early days, Amazon offered the lowest price. Then they changed strategy. They raised their prices across the board but included free post & packing. So, they went from being a lowest-price provider to most convenient provider. Has it affected sales? Yes - upwards.
The second example is from personal experience from the days of manufacturing cans for the food industry. Supermarket price wars were putting pressure on all players in the supply chain to cut prices. Competition to supply the likes of Heinz and Campbells was fierce. We were not the cheapest supplier on the block so it was potentially bad news if price had become the main differentiator in the market. So we asked our customers why they chose us – what was the most important factor in their buying decision: price, quality, innovation, logistics, choice, service? The answer surprised us. One of the most important factors was dependability. Delivering orders on-time-in-full to the quality spec meant no production hiccups at the factory and no additional costs of stopping the line. And it meant the production manager could focus on solving all the other issues because he could depend on us to do our bit. Dependability was a key differentiator for our organisation.
According to a recent study by IT research and advisory company Gartner technology providers are failing to communicate what differentiates their market offerings. 52% of vendors had trouble working out what made one product better or worse than others on the market. “In the face of sameness, buyers often turn to brand familiarity and reputation.” i.e. no-one ever got fired for buying from IBM.
Vendors may be failing to win new business because they are not communicating what makes them different, or because they don’t know their real value proposition.
Michael Skok has some good advice about creating a compelling value proposition. One of the key points is to actually ask your customers why they buy from you. You know all the features of your product or service but do you know how customers actually benefit from your expertise?
Product differentiation will help you get your foot in door, but may not be the complete answer. Two different products may both offer equally viable solutions for the customer. At that point, buyers will look for the extra clues on which to make their decision. Brand reputation is a subject for another day, but while you may not be IBM, it doesn’t mean you’re out of the running. There is a lot you can do to ensure that your business is appealing for quite different reasons.