Help! I have become a commodity!
Just after Labor Day, I presented a webinar to RSPA members on how a software provider could increase sales by way of their interaction with their customers. Nine aspects of your customer’s business were covered with illustrations of how each could be implemented.
To emphasize the point, I mentioned a recent shopping trip to an office supply chain store where every necessary component of hardware and software could be purchased. I concluded by saying that if no information or assistance was provided to the customer, there would essentially be no reason for the customer to purchase from an RSPA member.
During the question and answer period a participant expressed concern for multiple situations where the ‘customer’ was shopping on the Internet and then doing one of two things. The first was the ‘customer’ asking the software provider to match a price. The alternative was the ‘customer’ having already made the software purchase, attempted an installation, and then called looking for support.
Summarizing the comments of the person, it would be, ‘Help! I have become a commodity!’ It is an experience that all of us have likely had, as well as likely having done it to someone’s product or service. As an example, when you have walked into a grocery store to buy a gallon of milk there may have been several choices. There could have been a private label, a local brand and a regional producer. How did you make the choice of which to buy? If you struggled with the decision and did not know of a reason to take one over another, you likely took the least expensive.
To you the choice of milk is a commodity, but to the milk producer they believe you should know the difference in the three. If you did not see any advertising, listen to any suggestions by friends, or read the label for differences, you are unable to see any difference.
Where you have knowledge, or know you need knowledge, you will make the effort to differentiate; without it, price will dictate.
Back to our participant, how can we solve the challenge? If the software purchase has already been made online, the key is that the customer has come to a point where they are beginning to see a difference. We likely cannot get the customer to send it back and start at square one, but we could offer services such as installation or a support contract. From personal experience, I know that a support contract is a necessity. The support is invaluable if, and only if, the support staff understands what the data is stating. Just getting a report out of a printer is often useless information. Making a decision from the data in the report is where the customer makes money.
While we will have lost the initial sale, we are at least first in line to sell the next upgrade as well as peripheral items. We may have consultative services we can sell.
For the customer that is asking for a price match, one option is to simply say ‘no’. The problem with that answer is that we have no re-entry point to the customer. When it is time for an upgrade, if they have done without any service since they purchased the software they will likely not see any reason for purchasing support going forward. A second option is to say ‘yes’ and then work to help the customer much like the person that has already made a purchase and now has a need for assistance.
A third option is to package the product with a service so that a direct comparison cannot be made. As consumers, we experience this every day.
You do not go to the grocery store and purchase a 12 pack of beer, take it to a local bar and ask them to put it in the cooler for you. The bar only sells beer in a chilled glass. The consumer knows they are paying a much higher price at the bar. For the person that won’t pay the bar price, they are left to purchase their beer and take it home to enjoy.
The consumer purchases a netbook online or at a store and the netbook comes with an operating system and some basic software. The consumer that purchases a barbecue grill in a box at a mass merchant can take that grill to an independent for assembly, but the consumer knows they are going to pay a price for that service.
If the milk producer wants to differentiate, they change the color of the gallon jug, add benefit selling information to the label, and advertise to get people to look for their unique product on their next trip to the grocery store.
The idea is that with these examples there has been product differentiation. Without differentiation, we all gravitate to lower price; we all require something to become a commodity. You just do not want it to be what you sell. The business that is last to become a commodity is the business that wins.