Posted By: ILM
We are a manufacturer with a well-known brand. Our competition has lower prices that we are unable to meet for similar features. Sales have dropped dramatically over the last few years.
We think we have a quality advantage but the consumer is unaware of the difference. Because the consumer ranges from basic/beginner to advanced/expert knowledge, that quality difference is lost to the
basic/beginner category. The basic/beginner line has become commoditized and our competitor’s products meet the needs of the consumer at this level.
Management does not want to advertise a product that is not producing the returns it once was. They’e very hesitant to innovate new features, fearing failure. And they will not sacrifice quality on
this line, for fear of hurting the higher quality line. They know the situation and how dire it looks, but they are just too afraid to move in any direction.
Am I missing something other than innovation and advertising? Is there another solution that I have completely forgot about? I am sorry to be very general, but I would prefer not disclosing too much information.
BARQ’s response:
Dear ILM:
It happens to every company. You either compete on innovation (and on brand) or on price. If you compete on price, everyone loses (usually to Wal-Mart).
Advertising is just a subset of marketing. I offer these 2 insights from the late Peter Drucker:
• “Because its purpose is to create a customer, the business has two basic functions: marketing and innovation. Marketing and innovation produce results, all the rest are costs.”
• “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.”
It sounds like you don’t know your potential customer well enough to be able to attract his/her attention to YOUR BRAND over your competitors’.
Having a well-known brand does you no good if there is not a corresponding value to that brand. Brand is what allows you to charge MORE than commodity prices. If you can’t get that, then your brand must be known for other than value. Is that the brand you are afraid of hurting by lowering quality?
There are six basic methods for influencing your market’s buying habits:
• Reciprocation (you gave them something of perceived value, they feel obliged to buy something from you)
• Commitment and Consistency (they buy what is consistent with their beliefs or behavior)
• Social Proof (everyone else is buying it, so it must be OK);
• Liking (they like the seller — good ol’ boys and neighborhood sales “parties,” like scrap booking “crops”)
• Authority (it is what is recommended by someone in a position of perceived authority — government agencies or celebrities); or
• Scarcity (get it now before it’s gone forever).
All of these are methods for marketing your product. If you are not going to market it, sell the line — otherwise your share will shrink to nothing and the line will be worthless. Someone with marketing savvy will buy it and do what it takes to make money on it (if the market still exists).
Cris Ashworth of United Record Pressing in Nashville has turned around an antiquated vinyl record manufacturing company by taking advantage of the old vinyl pressing people who either couldn’t market this classic recording media, or didn’t know when to get out of the biz. He’s not using innovation or high tech equipment, but thriving on the niche global market of vinyl recording aficionados. He’s making a fine profit — and growing!
Without marketing or innovation, I am afraid your situation is not solvable from within. If you don’t get outside help (a consultant or hired gun) this could be a downhill slide.
Try to find case studies of turnarounds in similar markets or industries that identify how a brand was lifted above commodity status. Your product doesn’t need to BE better than your competitor’s; it just needs to SEEM better in the minds of your markets.
Good luck!
BARQ
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