Three Ways to Avoid a Price War

Julia Cupman
B2B Marketing
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Key Takeaways
  • Draw the buyer’s attention to elements in manufacturing or development processes that suggest a firm’s products may be of higher quality than those produced by competitors. 

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  • A strong B-to-B brand is among a firm’s strongest assets, providing a means of differentiation and credibility, and it can be a powerful tool in extracting value from a market. 

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  • Seeking unique brand and product benefits, together with detailed information on both customers and competitors, is key to differentiating an offering and avoiding competing solely on price. 

 

Implement a differentiated marketing strategy to avoid price competitions 

Non-differentiated products are notoriously difficult to market, and many businesses, particularly in the B-to-B sphere, struggle to communicate recognizable benefits that set them apart from competitors. As a result, businesses often attempt to boost sales by competing on price, which can result in price wars with rival companies retaliating in a bid to grab market share.

This is a flawed strategy. According to data that my company—B2B International—has gathered from global research projects over the past 15 years, the average proportion ofany market that ranks price over all other factors is just 20%​. This means that price-focused marketers could be missing a huge opportunity to distinguish their products and services by placing value on other aspects of their offering, which could appeal to the majority of B-to-B buyers.

In order to capitalize on this opportunity, marketers can drive differentiation by taking a three-step approach:

1.    Review the full product offering.

2.    Obtain an in-depth understanding of customer requirements.

3.    Define the brand’s position within the market.

Recognize Value Ove​r Price

B-to-B companies often undervalue the products that they sell by focusing on price, and the first thing marketers should concentrate on when looking to differentiate is the offering itself.  

Manufacturing processes, for example, are seldom identical, even though the end-products may be very similar. Differentiating features may exist in the raw material, the processing equipment, utilization of labor or processing control. Close examination of these factors could uncover new sales stories.

One key factor is to draw the buyer’s attention to elements in manufacturing or development processes that suggest a firm’s products may be of higher quality than those produced by competitors. Quality is often placed at the top of the priority list in B-to-B  markets, and procurement officials put their reputations on the line with their choice of supplier, elevating its importance. To these individuals, quality represents both value for money and job security.  

Service is also a common and highly desirable feature which can be used to differentiate a product. Focus can be placed on several benefits such as delivery performance, the speed and efficiency of sales staff in dealing with inquiries and orders, and the timely supply of effective technical help when required.

Invest in Comprehensive Cus​tomer Research

After identifying areas that can add value, it’s key for marketers to understand the priorities of potential customers so that they can be segmented and targeted accordingly. By implementing a customer segmentation strategy, the price-focused customers can be separated from those who place a higher value on quality and excellent services, providing businesses with a target audience for the new messaging.

Good segmentation must start by researching customers in an unstructured manner—ideally in focus groups or in one-to-one interviews to encourage wide-ranging, honest discussions. The marketer’s emphasis can then narrow in on the audience at whom value-added benefits should be communicated.

Distinguish the Brand’s Position

Understanding a brand, particularly its unique selling proposition, is key to avoiding competition on price. A strong B-to-B brand is among a firm’s strongest assets, providing a means of differentiation and credibility, and it can be a powerful tool in extracting value from a market. On average, approximately 5% of a company’s stock value derives directly from the brand image, meaning sales revenue, prices and profitability can all be increased through the process of brand building and delivering on its promise.  

It is also important to determine a brand’s perceived strengths and weaknesses against competitors, as marketers cannot make judgements on how to differentiate a brand without having a detailed knowledge of competitor activity.

While some of the information can be gathered through desk research, gaining full insight can be a difficult task. This can be made easier by speaking to distributors, agents and importers who, at the center of supply chains, are in frequent contact with a range of firms and are close to the market as a result. The majority of sectors also has a number of independent ‘experts’ of some kind who are willing to share the information they possess, e.g., industry associations and journalists. Once intelligence on rivals has been collected, a business can then look to specific differentiation strategies.  And of course, research directly with customers is invaluable in obtaining the perspective of the buyer, specifier and user in terms of their views on what makes each brand and product different and the value of this differentiation.

In summary, seeking unique brand and product benefits, together with detailed information on both customers and competitors, is key to differentiating an offering and avoiding competing solely on price. By rethinking the marketing of even the most basic product and creating a strong, differentiated strategy based on added value, it is possible to defend against competitor price cuts and even command an optimum price.

 

 

This article was originally published in the September 2015 issue of B2B Marketing​.


Author Bio:

https://auth.ama.org/PublishingImages/Julia%20Cupman.jpg
Julia Cupman
Julia Cupman is vice president at White Plains, N.Y.-based global B-to-B market research agency B2B International.
Add A Comment :
 

Displaying 2 Comments
grannelle@comcast.net
September 16, 2015

Outstanding thoughts here - competitive pricing can quickly become a quagmire from which little, if any good can be gained, and much damage possibly incurred by all involved. The approaches outlined here offer excellent strategic alternatives to one of marketing's knottiest problems. Thanks for sharing!

Stephen He
September 24, 2015

Very interesting--will definitely share with my marketing students since we are covering B2B next week. Thanks for the insights!

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