Alan Gayle is a sales and marketing consultant specialising in the construction industry. In this column he offers advice on how to make an impact in the market. This time he says: Spot the difference?
Following last month’s article on profits without price cutting, when I talked about Skanska’s impressive corporate results for 2011, this month’s article is all about setting yourself apart from your competitors.
As a quick reminder and for anyone who missed it, Skanska’s turnover was 4% down but its profits were 10% up.
By the way, you can still read last month’s article (‘Profits without price cuts’) or any of the previous marketing articles by searching for ‘marketing’ in the news archive section of the Natural Stone Specialist website: www.naturalstonespecialist.com/currentissue/searchnews.php
Right, now the Editor will be happy that I’ve plugged the magazine’s website, back to the subject.
The marketing term for making your business stand out from the crowd is: differentiation.
As we all know, the construction industry is highly focused on price and it can be tempting to concentrate all your efforts on offering the lowest price for everything you do.
While the ‘cost leadership’ strategy can work for a few companies, there are almost always other factors affecting buying decisions that you can take advantage of to raise your price. If the only reason your company wins business is because you’re the cheapest, you need to generate very high turnover to compensate for your very low margins.
Of course, we all want to pay the lowest price possible for everything we buy, but quality, availability and confidence in the supplier also play their part.
Differentiation is about translating what is different about your company into benefits that your customers are willing to pay to get. That could be anything from a quick order turnaround to the independent accreditations you have that your competitor hasn’t.
Sage don’t make the cheapest accounting software but it is market leader. Neither Dell nor HP sell the cheapest computers, but they dominate the PC hardware market. I doubt Foster & Partners slash the price of their architectural services, yet they are involved in many high profile (and high profit) projects.
In the competitive world of building products, both Rockwool and Kingspan have dominant positions in their respective sectors of the insulation market but cheaper alternatives are out there. There are many other examples.
These companies have spent years (and often many thousands of pounds) convincing customers that their products or services are a cut above the rest.
They don’t concern themselves with winning every single order, they focus on the orders that will provide the level of profit they need.
Differentiating your company is no easy task. It can take years of consistent effort. But financially, the rewards make it well worth the effort.
Put yourself in the shoes of the key decision-maker of the most important potential customer you can think of and ask yourself just one question: “Why should I use you?”
If you haven’t got an instant, compelling answer it might be time to start working on it. Because if you have to rely on price to win every sale, you will find it very difficult to position yourself at the higher end of your market where the more discerning customers are focussed on top quality. Certainly they want value for money, but they definitely do not want cheap.