How can I get my customers to pay more for my product?

All of us in the construction industry have complained at some time that margins are tight and we cant put our prices up because that would make us uncompetitive. You know what its like in our industry we say, everyone buys on price. But we have been talking to lots of people in the industry recently and they are saying something different. They want the best value, and if you buy on price it doesnt take into account the certainty of getting what you want on site when you want it. Some people are talking about exit costs rather than actual price.

But what does this exit price mean? Well, it takes into account the cost of being messed about when materials arent delivered when they should be or contractors building incorrectly so it has to be re-done. All these things add to costs. What companies are looking for now is certainty as they start to work out the costs of making mistakes.

So, the implications of this is that if you can show your customers that although you might charge a higher price the certainty that comes from it, makes the choice cost-effective.

There are lots of ways to do this. Look at examples outside the industry like Virgin and Tesco. Inside the industry some suppliers are starting to work heavily with their customers so they differentiate themselves by understanding their customers business better and can add value because of it.

So what you need to do is to find out what your customers value. And if you can provide the certainty they need, by differentiating your product or service to meet their needs you can charge more.

Leading Edge can help with this. We can work with you to look at areas where you can add value to what you do that your customers will see as beneficial to them. By using us to take an objective big picture view, together we identify how you can differentiate your product or service to be able to charge a premium price.

Case study - differentiation

Our client was concerned that their position as market leader for cementitious products was being eroded and that they had lost their innovative edge. They asked us to investigate ways in which they could strengthen their competitive position and aid new product development, especially in the light of increased activity by cement manufacturers who were keen to offset falling sales of bagged Portland cement.

We devised a '360 degree' research programme comprising 1) Consumer research focusing on end-use application, DIY store preference and user satisfaction; 2) Distributor research at retail DIY store and Builders Merchant level to gain insight into buyer type, merchandising and attitudes towards partnership; 3) Contractor use in a commercial environment; 4) Competitor research to analyse saturation in the market place, trends, promotional activity to identify possible opportunities to exploit. The results of these various levels of research provided us with a strong framework of recommendations. This has given our client the knowledge they need to help combat the mounting competition by addressing service issues, boosting promotion and merchandising activities and, directing strategy and a new product development programme.

What our clients have said when using us to help with Differentiation:

• "We would work with them again and recommend them."

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