How Do You Sell Value In A Walmart World?
It is no secret that there is at least one competitor in our industry that touts himself as the "Wal-Mart of the Adhesive World." Sadly, there are plenty of others who may not necessarily consider themselves Wal-Mart clones, but their actions in the marketplace seem to signify that they too espouse to the Wal-Mart ideals of "the lowest prices guaranteed."
What happened to all the talk about selling value? All I can figure is that we have too much capacity in the industry and the pie that we are all chasing is not growing fast enough to accommodate everyone. It is the proverbial supply / demand scenario where there is too much supply and not enough demand. The smaller, regional guys used to be the only ones who sold on price, however, now we have some of the larger players getting into the fight. We have all heard the stories, true or not, where a certain company has lost volume so one of their brilliant leaders challenges their sales group to go get business, damn the margins. Next year, these same leaders will challenge their sales group to grow their margins. It seems to be a vicious cycle of stupidity where the ultimate goal is to satisfy stockholders or board members, depending upon which way the wind is blowing. As for the little guys who only know how to sell on price, the only thing I can figure is that if they can make a few pennies a pound, they are happy. I also believe they don’t truly understand what their true costs are. They fail to consider the true costs for packaging, labor and overhead, and worst of all, they typically sell everything freight delivered, regardless of the size of the order. In case people have not noticed, freight is a very large nut these days and why in the world someone would pay the freight on, say, a drum of glue, which already has a low price on it to begin with, is beyond me. I simply don’t understand how their math works.
There is, no doubt, a lot of room in our industry for consolidation. I have heard it said that some of these “bottom dwellers” in our industry are simply trying to grow in order to make themselves attractive for a potential buyer. If I am a buyer and I am looking to grow my business, which would I prefer; a company with large revenues and low profit dollars or a smaller player with nice profit dollars? Unless I am missing something, value is derived not so much from size but from how much value a company brings to the bottom line. Certainly there are other considerations when buying a competitor, but unless I am totally out of bounds here, a company with decent profits is worth a lot more than one that simply has size to offer. When you get right down to it, unless you have some unique products to offer that no one else has, buyers ultimately pay a multiple of earnings, not revenues.
So, back to the original question; how do you sell value in a Wal-Mart world? No doubt this is a tough question these days, but I think you must seek ways to separate yourself from the rest of the pack. You have to choose your battles and opportunities and I can tell you for certain, it is not to be found in bid situations or in large company RFQ’s. These are nothing but a way to drive a customer’s costs down and your profits away. You need to chase opportunities where value is derived not by the lowest price, but where quality, service, and total costs have merit and truly mean something to the customer. I can cite a number of examples where we sell a given product at a higher price (a fair price) than a competitor would but the customer is willing to pay more for the total value he receives. On top of that he doesn’t have to go to sleep worrying about if his product will arrive in time or if his supplier’s product will work. He feels he is getting a good value for his money and that brings great comfort to him.
For those who sell on price and price alone think about it this way; your price is only as good as it is until the next guy comes in behind you and low-balls you. It’s typically a short sales cycle with not a hint of value associated with the sale. It’s all about price, price, price.
This industry has moved away from value selling to commodity selling, just like oil, or peanuts, or hog nuts. To many, it’s all about price and nothing more. Fortunately, there are some out there who will pay more for true value because they know that the old adage still rings true; you get what you pay for.