Marketing Strategy and Competitive Positioning pdf ebook

Commoditisation
One impact of the revolutions that have taken place in operations management and supply 
chain design has been to reduce product and service differentiation in many sectors. Com-
peting products are frequently built on near-identical modularised platforms, and supply 
chains are designed for maximum speed and lowest cost. Benchmarking systems encourage 
suppliers to achieve similar performance against the same metrics. It is unsurprising that 
the result is growth in product similarity rather than differentiation.
In parallel, customer organisations increasingly pursue aggressive commoditisation strat-
egies with their suppliers – if all competitive offerings are essentially similar, then differen-
tiation can only be achieved through price, because that is how commodities are sold. This 
may be the preferred situation for the purchaser, but not usually for the seller. The chief 
purchasing officer’s modern armoury includes: RFPs (Request for Proposal, or an invitation 
to suppliers to bid for business on a specific product or service); Internet auctions; purchas-
ing consultants; and buying consortiums. These mechanisms all seek to reduce purchasing 
to a comparison of prices and product technical specifications. The challenge to sellers is 
to constantly expand the scope and value of the offering to the customer, and the impact 
of the offering on the customer’s business performance. Achieving differentiation with 
strategic customers requires new types of buyer–seller relationships that assist customers 
in implementing their own strategies. This underlines the need for the sales organisation 
to take a more strategic and less tactical role in developing and implementing business and 
marketing strategy.
Indeed, it may be that the sales/customer interface is the place where competitive dif-
ferentiation is actually achieved. Research by the US consultancy H.R. Chally, suggests 
that salesperson effectiveness accounts for as much as 40 per cent of business-to-business 
customer choice of supplier, because technology has made products increasingly substitut-
able (Stephens, 2003).
For example, SKF is the world’s largest maker of industrial bearings – a business highly 
susceptible to commoditisation. SKF’s fight to overcome commoditisation threats relies 
on the company’s 5,000 sales engineers developing close relationships with customers and 
liaising with technical experts deep inside their own businesses. The goal for sales is to align 
customer needs with complex technical solutions, often involving customised products. In 
several important ways, the sales engineer stands between the company and commoditisa-
tion (Marsh, 2007).