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Monday, May 9, 2011

It's a Different World

I have worked for years developing best case scenarios for my products and services. The way that I have best positioned my case has been to illuminate the VALUE of my services either in terms of pricing or the depth and capabilities of my services. Somewhere in the function of price and service I am able to make a case for my products.

More recently companies have started to not only care about the value, but want the best of both worlds also, meaning they are asking for the lowest price with the highest array of services at the same time.

This leads to a few things-

One, it takes longer to make a sale because companies are going further in their searches for the best deals.

Two, companies are in danger of falling for a promise that won’t or can’t be kept offered by companies that want their business and say what the customer wants to hear.

Three, it affects salespeople who are squeezed by the companies that they work for in order to maintain profit margins.

Four, in some cases the customer gets a great deal.

Five, in other cases the provider’s margins are too small to stay in business and no one gets the benefits of lower pricing.

So what now? Can companies really afford to keep offering more for less? My thought is that if we keep pushing for this eventually we end up with just one or two companies to choose from. Can you say monopoly? Then the pricing goes back up and there will be no other solution.

For the time being companies had better get in tune with the new reality.
In my mind the best thing they can do is take a realism pill and forget about getting huge increases in business over short periods of time. Even to the point of small temporary contraction for a time, but with the thought of staying profitable or at least not negative. The days of every other company going public and reaping the benefits of their value are over. We still see this thinking and it drives the corporate atmosphere of anxiety.

It isn’t enough to have a good product, and sell it making a profit, because companies are so concerned with their valuation. Whatever became of the thought of true value? In other words companies being worth what they profit not what can be speculated. We have become too concerned with making a killing and not with providing a value.

2 comments:

Dick Davies said...

I'd be careful about expecting low margins meaning lack of service. Again and again we see disintermediation from the internet changing the entire business model to provide BETTER service at much lower cost...although that is not done without incredible effort and innovation.

Bruce Goldstein said...

I agree that lower margins don't mean that companies must offer less service, and you reiterate the point that it is newer thinking that produces better service with lower pricing. Some would argue that it is actually older thinking and I would agree with them on this point. Providing service in some cases is an old fashioned idea and now it's new again. The point is that many companies look first to trim budgets in terms of their services without any concern for the long term effects on their viability, only on their valuation.