Know-How Exchange : Strategy

You've discovered that price isn't the key motivator. Rather than have us guess on what is, have you surveyed both your customers and those of your competitors to discover what is their primary motivator? A lower price can signal inferior quality, so by becoming a cost-leader you may be dooming your perception.

Customers may say the are "very sensitive to price" but their actual behavior may show they actually place a higher value on on-time delivery, or flexible delivery scheduling, or payment terms, or something else. You must have discussions with a range of industry players to understand their motivations and how they buy (discussions, not just surveys).

Rather than positioning yourself as the "less expensive brand X," can you identify something about your product or company that sets you apart? Perhaps you deliver superior service, or you provide more jobs for the local population, or you are more environmentally friendly...whatever it is, focus on what makes you different from your competitor. (Other than price, because as the others have pointed out, lower price can signal inferior quality.)

There are many possible reasons why you are not selling more, including:
- brand X has better quality
- brand X has better service. Could be anything, but one to specifically consider given your comments is that maybe they give better terms which allows the customers who have monetary issues to better handle their payment schedule. (or it could be the reverse - they are more strict and you are getting the financially weak customers, given you the challenges of late/non-payment)
- brand X is better available in channels (e.g. you are not at the places where people are buying, so they don"t have option to buy your product)
- the late delivery from the past is still on the mind of current customers,even though you feel it is a solved issue
- etc.

Without knowing more, we can't really identify which one(s) are the cause.

This could be a good time for a market survey to find out why customers pay more for the market leader's product than yours.

You need a structured way to interview customers (yours and Brand X's) to see why and how they select one supplier over another. Otherwise we are all just guessing.

As others have pointed out, it's not mostly about price. The price you ask is a direct reflection of what you think it's worth. Brand X obviously thinks it is worth more than Bosowa. It would be nice to know why that is. (Customers must agree with them.) And it's clear you've convinced the market that Bosowa is worth less. Focus on the "why" and the perceived value of the offering provided, not on the price.

Do you do win-loss analysis? That is when you pitch for business, do you go back to the customer to find out why you lost or why you won? The more you understand about the customer's needs and business the more you can help and then build a stronger working relationship.

You say you deliver cement - you don't say if this is wet or dry. Now for a customer that is cash strapped - eg construction before the building is sold - they might order as needed, rather than hold stock. That means that if you don't deliver on time they end up with a construction team unable to work delaying the project, and increasing their costs, so your inability to deliver on time can cause deep costs downstream and scheduling problems for other work. Now a competitor might understand this better and get a better price by both guaranteeing delivery and making sure delivery is always on time without fail (with emergency back up if necessary, or offer short lead times). A wise construction company would pay more for this extra service as insurance against other costs, and they'll appreciate a supplier who understands their needs - it's no good buying cheap if it ends up more expensive in the end because the supplier fails to deliver (in the B2B world this is known as quality of delivery).

Another approach is to get smarter about the product. This can include pre-mixing and quality testing, for wet cement, the type and reach of the delivery mechanism; storage and packaging (eg to prevent the cement from hardening and going to waste) and materials handling. Basically, can you show valuable improvements in quality, compliance, reduction of waste, improved environmental handling, improved safety, faster application. In the end the constructor has to meet certain standards and with 'cheap' they can feel those standards are at risk.

In the end you have to talk to your customers and get real feedback as to what they need and how you can better meet these needs.