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Sales Growth Strategy
Competing on price can be the "right" strategy if you align your entire organization's processes and practices to achieve the goal of being a low-cost provider. Think of Walmart. They have no frills stores, lower overhead structures, high volumes, lower quality and cost products. Or, you can go the opposite - the higher quality, differentiated route. Here you offer a higher cost to customers who are willing to pay more for a truely differentiated product or service. Think about items you have purchased and ask if you may have paid more than other similar products and why? Do you drive a BMW or Lexus? Why? You could have purchased a Chevy. Do you order a nice bottle of wine at dinner? You could have just had a bottle of two-buck-chuck. You recognized the percieved value and chose to pay more. You can do the same with your business BUT you need to truely offer a product or service that delivers on that promise. The path you choose is up to you.
The Discipline of Market Leaders tells us that there are 3 distinctive competitive strategies:
- Operational Excellence (not just price, but total cost of ownership)
- Product Leadership (innovation)
- Customer Intimacy
The best strategy for your company depends on: a) your target customers; b) existing competitors; and c) your organizational capabilities. Rarely does copying a competitor's strategy lead to market leadership, so its good that you are asking the question!
Some of this depends on the business lifecycle one is in. Early in a life-cycle, when many competitors are involved, then I usually prefer a high touch, high price differentiated solution (IE, product and services not just product) approach to enter and grow a market. Late in the business life-cycle, it may be easier to buy the business by acquiring a competitor and consolidating the competitive landscape with scale and lower pricing of commodities. This is true in distribution (see question above - I used to run the largest independent specialty pharmacy distribution company in the world and we started out with a high-touch model charging for services and then bought competitors to fill in coverage gaps. I also like the Tracy model of 3 competitive dimensions - don't forget - to be a leader you must be leading in 2 and at level in the third to actually lead an industry in this model.
Offering the exact same product to the market does not necessarily come down to pricing competitiveness in order to have a market edge and increase sales and/or profitability.
You need to have the right Go-To-Market strategy, and that
- What are you selling?
- When are you about to sell it?
- Where are you selling?
- Who are you selling your product to?
- Why would customers buy that product from you?
While the first and second W "What and When" would be basically since the premise would be that you are selling the same product at the same time as the competition, the remain 3 Ws are key to ensure your differentiate yourself from the market.
Therefore, if we had to consolidate the approach, a company can leverage two key differentiators in order to make a difference: marketing (Why and Who) and distribution (Where).
- Marketing first: the way you package your product, the messaging you create around it. Understanding your customer personae, gathering data on their habits (we are in the big data era right!), behavioral modes will enable to tailor the product uses for your customers, and even erect a whole new significance and means of the product, creating a strong link (a story) with your brand. Some products are mostly known for the strenght of their brand, because of the brand represents in popular culture and what it provides.
- Using the right media channels to engage your customer base, with the right targetting (and a dynamic one at that) in order to adapt to your customer consumption modes (where they buy your product, how and where they interact with your brand including all the digital touch points...).
All in all, it is a matter of customer engagement strategy. "HoW" to engage relies on marketing, where as the "Where" relies on distribution.
Hope this helps!
To simplify many good and detailed answers to this "age Old" question above, I advise CEOs to answer this very powerful question:
"Tell me in 30 seconds, what are your Unqiue Selling Points (USP's) for your business?"
If they can't answer this or thier answer drones on for minutes with lots of buzzwords and cliches, you found what the problem is and where work needs to be done!
The CEO ( above all ) must be clear, concise, and compelling when asked this question.
That's how any company, large or small, can compete and will be sucessful.
If the answer is muddled or not clear OR not compelling, than why should any customer or prospect, B2C or B2B, care about this company?
Once the CEO has it "spot on" verbally, then put it to paper and make sure it is communicated clearly across all internal and external channels.
Hope this inspires you!
Thanks @Michael and @joe. its of great help but what about distributors ? If there are so many distributors are there and company does not set the price of a product then distributors compete on price and quality is irrelevant in this scenario ? then what strategy a distributor should adapt to increase sales and penetrate into the market to gain more market share. Is it only possible through lower price or is there any other way we can achieve greater market share ?
Thanks @Fred. What I understood from your point is that if you are a distributor and selling something which your competitor is selling on same price then the way to increase your sales and profitability is to give your customer best customer service to differentiate yourself from your competitors.
It's all about differentiation. And, the better those differences align with what customers need and want, the better the product is in a positioned to grow and control the market. Of course, customer demands change and there will always be challengers so, constant innovation has become a must in most areas.
In ecommerce world - currently only your processes automation and the better customers service in the whole purchase circle, can help you to differentiate from your competitors that sell the same products.
I see it in a household, electronic devices market - similar prices, offers, products.
Who wins? Only with good price, availability, low shipping rates and a great customer service:
- easy to integrate your warehouse data - stocks, product descriptions, prices etc.
- a very low level of errors in shared data
- good product descriptions, photos, videos
- good communication flow to your customers, distributors, shops with different content, via many channels
- monitoring price- comparison portals constantly
- building a great mobile experience - responsive design, applications, etc.
- watching innovative communication channels that are used by your core customers
Many American distributors don't participate in it. Some companies even want money for integration with their systems or restrict using their product descriptions or photos. For me it is a joke nowadays where everything is online.
I noticed that producers are coming very deeply in this process by opening their own online stores for B2C and B2B.
It will change soon all markets soon. Distributors will be taken over by Amazon or eBay or producers.
Much of the thinking around traditional supply chain needs to change as disruption is eminent. Sales and sales growth will need new thinking, strategies and execution not currently done in the U.S. market.
Health plans and PBMs are already testing or starting new business models as they see the end of long-standing business practices as just one example.
Application of Programmatic Marketing (http://www.stateofdigital.com/what-is-programmatic-marketing-buying-and-advertising/olutions) towards implementing a Real-Time demand response model ( http://ieeexplore.ieee.org/document/5607339/) and general enhanced Digitalisation of services can give distributors an edge over one another. Social Media and Digitalisation Pre-ordering can also boost sales and increase potential buyer network. Likewise enhanced IOT Technology (for instance using digitalised data management/RFID enabled Delivery vans/vehicles that additionally keep records of orders/area mapping and order fluctuations etc in the Supply Chain mimicking IOT and Delivery of Products in the distribution process http://www.supplychaindigital.com/scm/iot-and-delivery-how-pallets-packages-and-products-are-talking-back ) where appropiate can further differentiate one distributor to another and give one an edge. In other words enhanced service and delivery means from distributor to distributor is equally important to differentiation.