How to achieve differentiation when selling a commodity ❓

Today I found this brilliant read on differentiation.

Enjoy the read…

By Lee Salz

Differentiate yourself by solving the problems your buyers face rather than trying to differentiate commodities.

Imagine being tasked with building a sales force that would sell the identical products as the competition, but sell those at a premium price. That was the opportunity I accepted when taking on an executive sales leadership role years ago.

In the ’90s, as Microsoft, Novell and IBM/Lotus became software powerhouses, they recognized the need to train users on their products. Without that training, there was a high risk of users being dissatisfied with the products and not purchasing future upgrade releases of them. Rather than train users themselves, they developed training channels. Individual training companies contracted with these software companies and delivered training on their behalf.
However, the software companies didn’t blindly let their channels train users. They created the course curriculum, certified the instructors on the courses, and set the PC standards for the classroom. In essence, the software companies regulated the classroom experience and marketed to users that they could attend any of the thousands of “authorized” training facilities for a fantastic learning experience.

While the software companies wanted to create a “ vanilla experience” for its clients, that was not the way their training channels approached the business.
Course prices were set all over the board. Salespeople told prospects that their training companies had better instructors and nicer PCs in the classrooms than their competitors, as a way to justify higher course prices. Again, the software companies wrote the curriculum, certified the instructors and provided the specifications for the PCs. How could it be better?

The software companies told clients that all of their authorized training companies were the same, like going to McDonald’s. Thus, prospects didn’t buy the better arguments. They bought low price. Why shouldn’t they? In the absence of differentiation, price is the ultimate decision factor. Yet, the task put in front of me was to build a sales force that could sell our courses at a premium price.

Next steps

While we were passionate that our training was superior, we could not prove it. The classroom was a commodity, but there was still an opportunity to differentiate ourselves and sell at higher prices.

We learned that IT managers had several challenges. First, when an IT manager needed to send an employee for a training course, he needed to get three to five signature approvals on the purchase order. It was the same repeated process for each employee for each course. It was a bureaucratic pain.

Second, there were a significant number of class attendees who, upon taking the course, realized that the course was not right for them or vice versa. This meant the training dollars were lost, as was the time the employee missed at work to take the course.

Finally, because of the demand for trained IT professionals, IT managers feared their trained employees would leave the company.

Given those three issues, we developed a sales strategy based on making it easier for IT managers to get the right training for their employees.

Key strategies

Our salespeople called on senior IT management executives rather than mid-level managers, who most of our competitors called. We introduced the idea of using a blanket purchase order for their training budget. Our training company billed against the blanket purchase order as employees enrolled in the courses. Interestingly, the internal process to get one blanket purchase order for a million dollars of training was the same as one for a fifteen hundred dollar course.

Before any employee was enrolled in a course, one of our education advisors interviewed the prospective student to make sure it was the training he needed and he had the background to succeed in it.

Finally, we offered a replacement guarantee. If an employee we trained left his or her company within a year of completing a course, we trained the new person free of charge.

As a result of this differentiation strategy, we became the largest, most profitable training company for Microsoft, Novell and IBM/Lotus. We sold our courses at 30 to 50 percent higher prices than our competitors. Because we had the blanket purchase order for the entire training budget, our competitors were locked out of these accounts.

While our competitors argued “better,” we positioned “different.” Differentiate yourself by solving the problems your buyers face rather than trying to differentiate commodities.


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