My company manufactures steel pipes and we are known for our high-quality products. However, our prices are higher than many of our competitors and we are losing market share. How can we increase our market share without compromising on quality and losing customer trust?
Obviously, quality – both quality of product and service – is paramount. But there are a number of tactics you can use to increase your market share, and each involves increasing your company's relative power, uniqueness, or indispensability in the customer relationship. In our experience, you should concentrate on tactics that fall into any or all of these four general categories:
1. Customization of services or products -- When you build a high-end, customized service around the more commodity-like products or services you are selling, then you can create switching costs that increase the customer's willingness to continue to deal with you rather than bidding out the contract at every opportunity. Ideally, you will lock the customer into a "learning relationship," but sometimes very price-oriented customers will be wary of allowing such relationships to develop. The trick here is to ensure that the high-end services you develop can only be duplicated by your competitors with great effort, even if they are instructed in advance (and they will be – by your customer!).
2. Perpetual, cost-efficient innovation -- To the extent that you can stay ahead of your customer with innovative product or service ideas, you will always have something to sell. Your organizational mission must center on being nimbler, more creative and cost-efficient – all at the same time. But the value you are really bringing to the customer here is innovation – not the products themselves. Realize that many tough customers will do their best to absorb your innovation in order to do it themselves, or perhaps even to disseminate it to your competitors. In either case their motive is to regain their negotiating power in dealing with you. So perpetual innovation is just that – perpetual. If you can keep the wheels spinning fast enough, and provided that you don't lose control of your costs, then you can safely deal with very tough buyers.
3. Personal relationships within the customer organization -- In the end, businesses have no brains and make no decisions. Only people make decisions, and people are both rational and emotional by nature. The individuals within your own organization need to have personal relationships with the individuals within your customer's organization. In your business, this might mean developing relationships with the design engineers and others within a customer's organization that are responsible for using your steel pipes in whatever final products they are manufacturing. Or, it could mean simply trying to migrate up the organization chart, so that your company can have a relationship with more senior people.
4. Appeals directly to end users -- A highly desirable brand or a completely unique product in heavy demand by your customer's customers will pull your products through the customer's own organization more easily. For example, the Intel Inside advertising campaign is designed to create pull-through for Intel. And when Mattel offers Toys-R-Us an exclusive arrangement for particular configurations, or products with brand names such as Barbie or Hot Wheels or Harry Potter, it is making itself indispensable to this very tough customer. Similarly, any sort of information system or added service that saves time or effort for the end user can also be expected to put pressure on the customer to buy. If you can come up with a compelling reason for end users to demand your steel pipes in their products, then that will be a very powerful negotiating tool when it comes to maintaining your price.
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