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Are We Allowing Ourselves To Be Commoditized?

by David Brock on May 2nd, 2012

My colleague Anthony Iannarino wrote an outstanding post:   “Mismatched Skills And Value Creation.”  Usually, Anthony and I are so aligned in our thinking that we tend to complete each other’s sentences.  But I had to disagree with part of his post, it was the perspective he presented on Commodity Buyers.

Virtually every product and service, at some time in it’s life cycle moves to commoditization.  As differences between offerings become smaller; as buyer familiarity with the products, solutions becomes greater; as perceived risks to the purchase decision become much smaller; then there is the potential that our offerings become commoditized.  Given no other differentiation, the only way to win is based on price  — or is it?

Don’t get me wrong, there are people that will always buy on price–regardless of whether our product has significant differentiation or it is a commodity.  Price is important to every decision.

But as sales people, I think it is incumbent on us—both for our success and the customer’s to always focus on value creation and to aggressively seek to create value in every situation. 

Value can be created with commodity buyers–it’s just different than what we may have seen before.  While commodity buyers may be driven by price, they are also seeking other things–they may want to have an easy, painless, hassle free, procurement process.  They may want to look at reducing the overall cost of the transaction–not just the price. 

As an example, a number of years ago, I worked with the Chief Procurement Officer of a very large procurement organization.  They were responsible for procuring everything from basic chemicals, office supplies, “nuts and bolts” (literally), to complex computer systems, communications systems, development tools, machine tools and thousands of other items.  They managed billions of dollars in “spend” every year.  When we started to analyze their procurement processes, we started seeing very surprising data in the “costs of procurement,” or the costs of doing a transaction.  In some cases, the costs of procurement started to approach the purchase value of the items being procured.  Clearly, they had a problem that reducing the price of the commodities they were buying would not solve.

Some of their really smart suppliers recognized this as a problem.  They started working with the customer in seeing how they could reduce the cost of procurement.  Clever vendors realized there was value they could create in helping the customer reduce these costs–while still maintaining superior (but competitive) pricing.

Procurement organizations are very sophisticated–they are shifting to be strategic sourcing organizations.  They realize there is more to “save”  than just on price negotiations.  Supply chain management, vendor managed inventories, contract simplification and management all become critical elements of value that can be created for “commoditized products.”  In their book, Challenger Sale, Dixon and Adamson cite the example of W.W. Grainger challenging their customers on their process of procuring commoditized products. 

There are hundreds of other examples.  Indeed, some of the best thinking of creating value that I have encountered is from organizations who sell commoditized, undifferentiated products.  The sales person who sells carbon black and commands a superior price has to think about value creation differently.  The sales person that sells commoditized electronic components needs to be innovative in how they create value.  Sometimes those of us who sell more “complex or differentiated solutions,” are a little lazy about value creation–we still can rely on the differentiation of our solutions.

As sales people we have to be leaders, for our customers and with our organizations.  We have to constantly focus on value creation–in every sales situation.  Value can be found and created everywhere.  It’s our responsibility–not the customer’s, to create, communicate, and deliver that value.  We cannot succumb to the commiditization of our offerings — even if they are commodities. 

If we allow ourselves to be commoditized, if we allow ourselves to stop searching for and creating value, then we deserve the outcomes we create.

Are you constantly looking to Create Value?

(For extra credit, as you think about this, study and learn about Strategic Sourcing.  Go talk to the top sourcing and procurement executives in your customers and understand what they are trying to achieve.  They are hungry for value, you just have to learn how you can create value for them!)

Book CoverFor a free peek at Sales Manager Survival Guide, click the picture or link.  You’ll get the Table of Contents, Foreword, and 2 free Chapters.  Free Sample

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