We are living in an era that offers the buyers of today a plethora of options. Subcontract services are available in abundance, meaning that purchasers are in some ways spoilt for choice. This has its own pitfalls for the buyers, but what do the suppliers do to stay in business and in ‘the game’, so to speak?
Things have certainly changed in the last couple of decades. I heard a thread of conversation the other day where someone was stating that 25 years ago, they were one company in only about five to six companies across the UK that could provide their service. Now, he claims, there is a business on every corner that can provide this same service. How can you compete with so many competitors when prices differ for so many reasons?
I spend a lot of my professional time communicating between UK subcontract engineering companies and UK manufacturing buyers. Buyers are expected to adhere to a budget and also make sure that their suppliers provide the quality and reliability on top. Understandably, suppliers get frustrated with this because, let's face it, quality does mean a bit more money, as well as increased effort. And with more companies offering a similar or the same service, it can make suppliers feel like cost is being driven down by too much competition, making it hard to make a living.
Is price everything?:
Here are a few of the things that I’ve overheard suppliers saying:
- ‘Buyers will go for the cheapest price……’
- ‘It’s all about price.’
- ‘There are people out there who are doing it cheap as chips.’
Let’s be brutally honest about these statements and get it all out in the open so there is absolutely no confusion: YES, price is always going to be a key factor! Whether you use a lead service like Qimtek, or you have a very steady stream of business leads coming directly to you, price is always going to be one of the top three things that the buyer is going to be looking for. What you need to do is hone in on what they are getting for that price and how you can manipulate that in your favour if you want to win the business. When you get feedback on your own prices, do you even stop and ask the client what they are actually getting for that price that puts your out of the running?
A great price is useless if the lead and delivery time is too long; incidentally, a cheap price is great if there is no compromise on quality. And a good ‘deal’ is not one if there is no certainty that it can be sustained. What can you do? Can you offer better?
Adding value:
Understanding your potential customer’s needs, and creating more ‘added value’ to your company is what will help you make it in an environment where a surplus of supply is growing. Understanding what your customer is looking for starts with questioning them about what is important to them. If you dwell on price, so will they; if you don’t fact-find enough with your client, they will go to someone else who is trying to understand them. Believe me, there are some very successful companies out there who are not compromising on price, because they are offering more.
Added value in the manufacturing arena is no different to how we see it in our own domestic lives. Amazon Prime members get free next-day delivery on thousands of products. You can probably find it cheaper even with the delivery cost, and yet people are prepared to pay £75 a year to have this ‘perk’ in their Prime Membership. Two prices on a bill can appear to a lot of people as ‘more’. You may even be prepared to pay more on the ‘Prime’ product because, hey, that next-day service means it is delivered sooner! This is added value that Amazon have done very well, and they make money out of it! In manufacturing, if your price includes two or three additional value-adds that are of benefit to the buyer, you become a very appealing choice.
Find out if a quick turnaround for the delivery of goods is important to the customer. They may be in a jam and if you can help, price may become a secondary factor.
Are there secondary processes that the goods need to go through that your company might be able to provide? Could this save the buyer another headache?
Instead of submitting your prices and hoping for the best, build a rapport with your client that tells them you care about doing business for them. Get what is needed from the horse's mouth.
You may be able to compromise on cost if you know you're going to get long term repeat work. Ask where a partnership could lead if the right elements are offered.
Remember, buyers are people too!:
As people, we are creatures of habit and security and buyers are very much people! The more you anticipate the needs of your customer, the more you put them at ease and provide them with security. People want things to go smoothly - if you can deliver a seamless service with no worries for the buyer, they will use you on an ongoing basis out of habit!
Price will always be a key. You can either give up and blame the market for this or you can make it work in your favour. We would still have a problem if all goods were costed the same, because again, you need to look at what other companies can offer that you are not. Instead of compromising your prices, make the buyer understand what they are getting for that price and tailor it to what is going to matter to them.