| clocks for websites |
Article
A Box is a Box, is a Box
September 1, 2008 By: Jack McCullough Paperboard PackagingOne of the biggest obstacles to corrugated packaging companies improving their bottom line is commodity pricing. Of course this is old news — the question is what can you do about it? How can you escape the commodity pricing paradigm and grow your share of the increasingly competitive corrugated market?
 |
Commodities are created when a product, such as corrugated boxes, becomes standardized. When this occurs, factors such as product features and quality are increasingly overlooked by buyers who begin to focus on price in their purchasing decisions.
Customers that need RSC 0201 cases can get containers made to this specification from most converters. Because there's little or no differentiation of these products between suppliers, customers focus on price when buying.
Why would customers pay more for a container from converter A, when they perceive that containers from converters B, C, and D are identical? If there is no product differentiation, then the deciding factor is cost.
An effective marketing strategy will go a long way toward helping your business escape this trap — even if you're product mix is primarily stock boxes — but it can't fix everything. In order for it to be effective, it's important to understand the role of marketing in your business, as well as its limitations.
Marketing isn't advertising. Advertising is subset of marketing — it's a way to get the word out about your products, it's persuasive messaging. Advertising isn't going to be effective unless your marketing strategy is well researched and executed.
Marketing encompasses a range of business activities that work in concert to bring buyers and sellers together — it's the "whole pie," of which advertising is just a slice. Additionally, marketing isn't something you do after you've developed a product or service — it can't save a poorly planned product that's been created without consideration of the value that your target customers are actually searching for.
Your marketing efforts should begin before product and business development does, and should direct both efforts. Identify your customers' wants and needs, and only then develop a solution. Don't create a solution in a vacuum and then go searching for a problem to solve.
If you bring marketing to the table in the very beginning of the process, you'll have greater success creating something that customers want to buy in the first place. More importantly, you'll produce something that they need.
What Do You Do?
A good way to begin is by taking stock of your business and your long-term strategic and tactical goals. It doesn't matter if you've been operating for 50 years or for five, continuous review of who you are, what you do, and where you want to be can spark new ideas that lead to innovation and success.
What does your business do? Don't just repeat the mission-statement description, but dig down and look at what you really do. Your simple answer might be that your primary business is creating corrugated containers for the fruit industry, but if you take it back a few steps further — you can say that you create corrugated containers. Take it all the way back, and what you really do is convert corrugated sheets (or produce corrugated board).
The further you break this idea down, the more likely you are to find opportunities for innovation. If you can't get beyond the idea that you're a manufacturer of stock boxes, or sheets — it's likely that you'll miss strategic opportunities to break out of the commodity pricing trap. I'm not suggesting that you abandon your product mix, just think — in this case literally — outside of the box.
How Different Are You?
Examine your product offerings. How different are they from what your competitors are offering? If there isn't any appreciable difference, it will be difficult for your product to escape commodity pricing. You have to create differences that your prospective customers will see as beneficial and desirable. If you produce better products that are distinguishable from competing offerings, then you're on your way to commanding a better price.
There are many ways to differentiate your company and products from your competition these can include unique business models, value added services, etc. To help identify areas where you might shine, consider factors that can influence buyers of your products. These might include:
- 1. Product quality
- 2. Product features
- 3. Product mix
- 4. Customer service
- 5. Value-added services (design, inventory management, etc)
- 6. Fulfillment services
- 7. Faster order completion
- 8. Free services
Notice that I didn't include price among the factors. We don't want to consider price as a differentiating factor since we're trying to escape that trap. If you believe that you must primarily compete on price, then that's exactly what you will end up doing. Do some research with your prospects, and develop your own list of factors that influence buying decisions.
Sell Value — Not Price
To escape commodity pricing, you must successfully get prospects to include multiple factors in their buying decisions, in addition to price. Promote those areas where you shine, and be consistent in your messaging and marketing materials. Brands that sell based upon value — real or perceived — command a higher price.
Years ago, I was a senior manager at a large printing company. We faced similar problems of commoditization across our products and services. Despite the fact that we had better equipment, and produced better quality work, we were usually forced to compete on price.
To identify areas that would allow us to add value and increase market share we went to our customer base and asked what their major pains were. We discovered that these included lack of prepress experience, no access to inexpensive proofs, and the high cost of workstations needed to do high-end photo manipulation.
A month later we opened a service center staffed by two prepress professionals, and outfitted with the same equipment and capabilities that our prospects needed. We allowed any customer and select prospects to come in and use the center for as long as they needed. This established our company as experts and forged customer relationships that increased our sales by more than 20 percent within 60 days.
If you've done your homework you'll be able to identify where prospects will perceive value, and work from there. Look to other commoditized industries for examples of unique value propositions.
Dell Computer produces a heavily commoditized product — personal computers. They built their brand around custom building and shipping PCs directly to their customers. They've been successful in moving the buying decision away from being only about price — and were able to claim a large share of a highly competitive and commoditized market.
Companies like Dell have managed to command a better price for their products and services, in spite of commoditization, precisely because they've identified opportunities to create and promote value over price.
There is no reason why your company can't do the same.
Develop and Promote Your Brand
Branding your products is an excellent way of influencing a buyer to consider factors other than price when making a purchasing decision. A successful brand can build customer loyalty and deliver long-term value to your company — and communicates positive messages about your products' and company's value, image, and reputation.
Branding your product can clearly communicate differentiation of your products from those of other corrugated producers. By building trust with customers, a brand can make their buying decision easier and your products more profitable.
Building a brand comes back to promoting value — communicate the areas where you shine. Have you won awards at corrugated packaging shows? Have you invented a new process that makes your boxes more environmentally sustainable? Are you committed to green manufacturing? Were you the first company to produce a certain type of box or board?
If you answered yes to any of these questions, then tell your customers and prospects about it. Emphasize your unique selling points, but be sure that they are sufficiently unique. If your competitors can easily make the same claims, dig a little deeper and differentiate yourself further.
Shake Things Up
Every industry has a general set of business models that have developed over time. Some are better than others. The drawback is that these same models are a major contributor to commoditization of an industry. While standardization of processes and identification of best practices can lead to increased efficiency and quality in manufacturing — standardization of products promotes commodity pricing, and reduces opportunities for genuine innovation.
Look for ways to reinvent yourself and how you do business. Don't get caught up in the "that's the way we've done it for 50 years" mindset. That's a sure way to kill innovation and limit strategic opportunities.
Take a cue from the pharmaceutical industry, which through effective branding targeted to consumers rather than doctors, generated demand for its products among patients who then influenced their health care providers' buying decisions.
Look for opportunities to promote awareness of your brand among your customers' clients — which can increase demand for your product from your own customer base.
The suggestions that I've made here are only a start, but will aid you in avoiding the commodity pricing trap, and increasing your bottom line. By creating and communicating value, you'll be better able to command a higher price for your goods.
