The commoditization death spiral.

  1. Companies need to gain a more in-depth and more accurate understanding of what features, functions, and benefits affect willingness to pay and how the entire decision landscape works within their customers.
  2. They need to use this information to train and retrain salespeople on what customers are genuinely willing to pay. Salespeople also need to be trained on how to defend the company’s prices better. Salespeople need to know what features, function, and benefits that genuinely increase willingness to pay so they can emphasize these in conversations with customers.
  1. Companies need to conduct price-focused market research. To understand in detail what customers are willing to pay and what features, functions, attributes, even what marketing messages and brand associations drive a higher willingness to pay.
  2. Companies also need to conduct a version of the same research on its staff: sales and marketing people, customer service, and support people as well as executives. The purpose of this internal exercise is to capture what the various groups in the company believe its customers find important.
  3. The company or an external agency should then develop a gap analysis between the two research projects. What will become apparent is that there is a gap between the externally-focused and internally-focused research projects. What customers’ say is important, and what affects their willingness to pay is going to be different than what the company believes about their customers, their willingness to pay, and what drives their purchase behavior. Likewise, there will be a difference between what the company believes customers are willing to pay and what customers are actually willing to pay. Customers will almost always have a higher willingness to pay that is higher than what the company believes. Different groups in the company typically have different perceptions of customers; marketing is different than sales, and executives are different than either one.
  4. From the studies and the gap analysis, training needs to be developed and implemented. Salespeople need to be trained on how to defend prices better, and it starts by them understanding the actual willingness to pay in the market. Marketing people need to be trained on what messages and positioning drive a higher willingness to pay, and therefore identifying the most effective messages in generating pricing power. Executives need to get an all-around view on customer preferences, as this might alter the company’s strategy.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store