Manufacturers of commodity products struggle to differentiate themselves from their competitors. Companies in these markets find themselves in a race to the bottom where lowest price is the primary factor on which a sale is won or lost. Consolidation is inevitable in these industries and the number of players will be winnowed down, but the survivors are still left with the same problem – how to differentiate themselves on a factor other than price.
How do you Define Yourself?
To solve this problem, organizations need to fundamentally rethink their relationship with their customers. Consider a manufacturer of commodity products – plastic plates, cups and silverware. Let us pose this simple question: What product or service do you offer to your customers?
Response A: Plastic plates, cups and silverware targeted to Corporate Cafeteria Service Providers.
Response B: We are in the business of training the Location Managers of Corporate Cafeteria Service Providers to estimate demand, order and stock optimum quantities of disposable silverware and serving utensils to ensure that diners’ needs are met at all times while simultaneously minimizing inventory on hand.
What a Difference!
The two responses are so different that it is hard to believe that they are talking about the same company. At its core, Response A is correct in the sense that the company gets paid for the plates, cups and other products it sells. But if all that is offered is a catalog of products and a website to place orders, then the long term survival of the company is tenuous, at best.
Response B reimagines the relationship between the customer and the company in terms of a Service or Experience. Instead of simply selling plastic utensils, it solves a fundamental problem for the customer – help local managers in hundreds or thousands of cafeterias scattered across the country maintain optimum levels of stock of plates and utensils. For a Cafeteria Operator, a company that solves this problem is a critical part of the supply chain and is no longer a commodity product seller. The manufacturer is no longer selling plastic utensils, it is providing a value added service or experience.
Through the Lens of Relationship
A Maintenance Repair Operator (MRO) actually reimagined their business along these lines and in the process reinvented themselves. Instead of just selling spare parts from a catalog, they created an exhaustive set of training videos that show how to use the spare parts to perform a repair. The technicians of their customers were all trained with the free videos and became intimately familiar with the MRO from day 1 on the job. From there, ordering the proper spare part with the MRO, as opposed to a competitor, was a natural extension from the training. Over time, the MRO became a habit – have a problem -> view video for solution -> order parts shown in video -> repair equipment -> repeat for next repair.
Think of ways in which you can reinvent your business by becoming a habit for your customers.