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Embracing marketplace realities

As competition increases, commoditization increases

By Ray Doane -- Industrial Distribution, 2/1/2004

Most wholesale distributors would agree that successfully marketing and selling any product today requires great flexibility. Customers' desires for specific products, and the channels through which they purchase them, tend to change constantly.

The truth is that that situation isn't new. As manufacturers have advanced product capabilities, and distributors have found better ways to engage customers, the state-of-the-art has constantly advanced since the dawn of the Industrial Age.

In the early days, distribution businesses offered a wide range of products. These general stores gave way to more specialized operations over the years, as product complexity increased. Now, we've cycled back to market demand for a wider, aggregated offering (a.k.a. one-stop shopping). But this time around, the customer is also demanding specialized expertise and support for the products they buy—a daunting challenge in itself.

At the same time, the globalization of the marketplace has allowed a substantially larger number of sellers to access your local customers. Competition is fierce. The dearth of competitors has moved many "hard products" to commodity status. Today, commoditization is a fact of life with most traditional products.

Recent market research established the degree to which, for example, drinking fountains and emergency equipment have commoditized. Price is still a paramount consideration in the minds of specifiers and buyers of both product categories. While this is not exactly "new" news, the growing lead that price holds over brand affinities, features/benefits and quality/dependability/reliability (QDR) indicates that both product categories are rapidly moving toward commodity product status. That's not good news for either manufacturers or wholesale distributors.

The squeeze created by customers demanding greater service and the lowest prices available has become the challenge of the new millennium for manufacturers and their distribution partners. This is especially true for premium brand manufacturers, like the Haws Corp., and distributors who have traditionally carried premium lines and provided consistently high, premium customer services.

When price is the only thing you offer, there's always someone willing to undercut you. However, you can still sell the customer a better product—that represents a better value for him and a higher profit for yourself.

So how do we accomplish that? Resist sliding headlong into a commodity-only competitive scenario by establishing and communicating clear differentiation between you and your competition. Manufacturers need to differentiate their products and add value, while also providing lower-priced alternatives. "Brand" has never meant more than it does today.

There are two things your competition can't offer: your captive brands and you.


Author Information
Ray Doane is vice president of sales and marketing for the Haws Corp. in Sparks, Nev., a manufacturer of drinking fountains and emergency equipment. Contact him at (775) 353-8351 or rayd@hawsco.com.

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