Rapid commoditization of products and services is exasperating even the most skilled professionals. The solution provider is struggling to differentiate its unique products and services. Simultaneously, customers are putting the squeeze on margins and driving unique value to the lowest common denominator—price.
How is this happening? Why is the trend increasing at an alarming rate? And how can you hold your price and get paid for the value you deliver?
To start to understand this dilemma, we need to take a hard look at the three driving forces of commoditization:
- Advances in technology
- Lack of connecting unique value to customer's business drivers
- Pressure on buyers to make quality buying decisions
Companies are constantly seeking differentiation by upping the ante in technological advances. When the ante continues to escalate, you may find yourself playing not only against the advances of your competitor but also against your customers' best interests.
Seeking competitive differentiation through increasing uniqueness and complexity can be a deadly double-edged sword, especially if building that differentiation exceeds the needs and understanding of your customers. You and your competition may believe you have a high-value product or service, but if your customers can't comprehend, calculate or measure that value, they see sameness—and will respond by ignoring the features they do not need, or they simply won't care.
However, they do understand cost. And there goes the downward spiral to commoditization.
As technology advances, so does the difficulty buyers have in making quality business decisions. Put yourself in your customers' situation. How often have they made a decision regarding products such as yours? How similar are your products to your competitors'?
Can your customer truly understand and differentiate the unique value of your solution, and how it impacts not only their job responsibility and performance but also other responsibilities in their organization? Even more critically, can they understand the cost of their problem in absence of your solution?