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Guest blogger - Andrea Olson, MSC and CEO of Prag’madik
Differentiation is challenging. In the manufacturing space, many companies with perceived "commodity" products, continue to feel the pressure from customers to provide high-quality products at a lower and lower price point.
This "race to the bottom" is a means to an end - an end of a profitable business.
Manufacturers struggle with trying to differentiate their products from their competitors, and often focus on product line expansion and reacting to customer demands to solve the problem. Adding more products to the pipeline doesn't directly equate to more sales, as often it is a reaction to a competitor, rather than the identification of a broader marketplace demand.
Those companies that simply "stick to their knitting" and continue to push out the same products in the same way they have for decades to 2 or 3 key customers are putting their companies at risk. When you're not continually pushing to create new value-added products and services to your customers, you are simply a vendor. A vendor that can be pressured on price is a vendor that can be switched out at a moment's notice.
The Differentiation Threat is not going away anytime soon. The need for identifying, creating and providing unique value to customers is the essential to long term growth and profitability.
There are three core areas of differentiation that manufacturers need to examine and capitalize on to stay relevant:
Customer Service and Engagement - Customer Service isn't just order fulfillment and addressing questions on warranties. Customer Service is just that - service. Manufacturers need to examine new ways to increase, expand, and improve the way they service their customers. This can range from communication methods (beyond email and telephone, to customer portals and transparency of information) all the way to predictive services (identifying a product issue in the field and proactively responding before the customer even knows about it). Manufacturers also have the opportunity to provide value-added content and information to help their customers' challenges with training, education, and best practices. It's about more than fulfilling an order, but identifying and addressing unserved needs with your existing knowledge, skills, and resources.
Leveraging Technology - You create and deliver a product, but can you use technology to improve the performance, price, or value to your customer? The advancement in technology has provided virtually an unlimited amount of opportunities to add value and differentiation to your product offerings. Ranging from RFID to remote tracking and performance measurement, technology can add new value to both commodity and advanced product offerings. In addition, technology can be the differentiator for the purchasing and inventory process, for example directly connecting to OEM's procurement systems to reduce administration costs and ordering errors. If you can use technology to save your customers' money, it's a differentiator.
Value Added Insights to Help Your Customer's Business - Any company can provide a product. Manufacturers need to identify what challenges their customers face in their businesses. This deep-dive requires a comprehensive understanding of your customer's business - how they make money, what keeps them up at night, and what costs they want to eliminate. In addition, finding ways to change the design of products to not only increase performance, wear life, and even shipping costs, add value by means other competitors cannot. It's about looking outside the box and identifying ways to improve your customer's business - not simply how you can sell them more products. The downstream revenue will come when you add value to your deliverables.
The differentiation game requires thinking about serving customers in a unique way - not centered on your operations, but theirs. Understanding how you fit into their value chain. How you can make doing business with you simpler, easier, and more cost-effective. How you can identify and deliver ways to improve their business and help them compete more effectively. Becoming a value added partner, rather than a supplier, is the key to differentiation. This isn't a single solution, but a series of approaches that address a broad range of business problems. It not only cements you as more than just a vendor, but it also opens up your business to new opportunities, products, and markets. And that's the key to long-term, sustainable growth.