Introduction
Why would I ask such a silly question? Well, there is so much written about differentiating your products and services that it is not entirely unreasonable to think that some people will even wonder if a commodity can create customer value.
Let me use a brief story to illustrate my answer (which is a strong YES!)
My daughter is the Accounts Receivable Manager at a large public B2B company. She manages the collection of over 100,000 leases. She and her team always focus on a large but manageable number of open balances. And they all use binder clips to organize their notes and other information. They would have significant confusion without their binder clips. Yet, she does not know the brand of the clips she uses nor how much they cost. When she needs more, she takes a box to a supply room.
Her binder clips are probably the ultimate B2B commodities. Yet, they help her achieve her required business outcomes better than any other alternative. And she is not actively looking for a replacement since they do what she needs to be done. It is for these reasons that the clips have been around since 1910.
Technically speaking, my daughter is an end user. She is not the purchaser. In this case, the purchaser of the clips is the facility, Office Manager. She buys the clips and the rest of the office’s stationery needs from a distributor who does not offer a commodity service. They offer a differentiated service. Orders can be placed by phone, via an app., and through a website. Delivery can be same day or other. The delivery person can put the items in storage or leave them with the office manager.
To summarize, the end user of the commodity gets real value from the product and has no choice. The buyer receives value from the distributor and has choices of ordering channels, delivery options, and probably some payment options but, again, does not choose (or care) the product manufacturer. This is typical of many commodity product or service relationships. And they work. But there are also potential problems caused by getting specific signals crossed.
The 3 Types of Buyers
According to John DeVincentis and Neil Rackham in their book “Rethinking the Sales Force: Redefining Selling to Create and Capture Customer Value,” there are three types of buyers:
- Those who believe there is intrinsic value in the products and services. This means that the buying business can extract all the value from the product and the acquisition process comes from the product. Essentially, they believe that everything should be treated like buying binder clips.
- Those who believe extrinsic value exists in the products and services they buy. They value their time with the salespeople. This means that the products and services are not commodities but differentiated and that the purchasing company gains much of the value from the actual buying process.
- Those who believe that some products and services have so much potential to create value for the buyer want to enter a high-level, strategic relationship with a partner. They are willing to reconfigure their whole business to get the extra value. Think about the medical community working with IBM and Watson to develop improved cancer treatments.
The purchasing gatekeeper must accurately assess the buyer type they must be when dealing with each potential supplier. The whole thing will fail if they want to buy Watson’s service, like they buy binder clips. Likewise, if they’re going to do a full evaluation of the binder clip market, for whatever reason, they should be put in the penalty box unless they work for Staples or any of the other big box sellers.
Suppose you are selling your company’s services. In that case, you are responsible for ensuring you know how you want to interact with the buyers and ensure the relationship is developing correctly. Please do not leave it to chance.
Key Takeaway
Commodities create value for your customers but not necessarily for your business. Differentiated products and services make positive customer outcomes and add value for customers and your business. Ultimately, this should be your objective.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of its clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization create more value for your customers, please contact us or check out some of our free articles and white papers here.