How building supplies companies can tackle commoditisation and boost sales

Author: Paul Black, CEO, sales-i

The UK construction sector has hit an unexpected high. The second quarter of 2017 got off to a surprisingly solid start with a growth spurt in residential building, and a slight rise in commercial building work. 

This positive development will benefit companies across the sector, and will hopefully coincide with an increase in demand for building and construction supplies.

However, merchants and suppliers need to watch out for an increasingly pervasive problem: commoditisation. Supplies and technologies that were once considered high-end or unique are now viewed as mere commodities, no better or worse than your competitor’s product. When one power tool is as good as the next, the only distinguishable deciding factor is cost. And, when the market is driven by the economic value of supplies, a price war is seemingly inevitable. 

To make matters worse, the builders’ merchants market is dominated by big businesses that can afford to undercut their products. Smaller players need to fight hard to compete and counterbalance the negative effects of commoditisation. A good place to start is to review the four ‘P’s of a successful sales and marketing strategy. 

It may sound like a basic exercise, but revisiting the right mix of product, price, place and promotion may prove critical to companies in the construction supplies sector that are striving to overcome commoditisation and maintain a competitive edge.

Let’s take a closer look.

Product 

Does your product truly meet your customers’ needs? You need to understand exactly what your customers want to buy and make sure that your products tick all the boxes. Check your product against similar versions sold by your competitors. If there is no remarkable difference, you need to start innovating. Product diversification is one way to push back against commoditisation. Explore the possibility of modifying existing products or even creating a new line that is even more relevant to current customer needs. 

You could also consider bundling your product together with a variety of ‘value-adds’, such as an after-sales maintenance service to help your customers take care of their new tools. These unique selling points can help your company stand out from your competitors and encourage customers to choose you first – and come back for more. 

Price 

Commodities are sold almost entirely on their economic value. In other words, when choosing between two similar sets of fasteners and fixers, customers will invariably buy the cheaper option. 

This encourages the development of a price war, with company after company discounting their goods to make a sale. As tempting as it may be (if everyone else is doing it, shouldn’t you?), avoid excessive discounting at all costs. These cheap quick wins will boost the sales ledger in the short-term, but lead to long-term complications. 

Cutting prices repeatedly will reduce your company to a ‘discount brand’, and this will damage your reputation in the market. Loyal customers will question the quality of your offering and take their business elsewhere, and your success will rely on one-off discount sales. 

Instead, focus on tailoring your pricing to meet specific demands. Keep an eye on peak sale seasons and analyse latent demand in the construction sector, and pre-empt surges in buying activity with lucrative up- and cross-selling offers. Look at how you can bundle your products into an attractively priced solution to capitalise on the current economic upswing – without undermining the quality of your brand.

Place 

Are you looking for – and finding – your customers in the right places? These days, new business is not always an easily identifiable target. Your sales team needs to be agile and proactive: if they’re static and stuck in an office making cold calls, they’ll never find new selling opportunities. 

Technology has made it possible for salespeople to hunt online through digital sales channels, as well as out in the field, far more efficiently. Your sales team can use tools like customer relationship management (CRM) systems and reporting software to improve the quality of their customer relationships and keep track of each interaction. Plus, the proliferation of mobile apps means your salespeople can access mission-critical information while on-the-go; customers need never feel neglected, deals are closed quickly and urgent opportunities are responded to in real-time. 

At the same time, it’s important to avoid irrelevant customers and markets that are beyond your reach. Your sales teams should put their technology to further use and collaborate with marketing on customer segmentation and profiling. 

You must focus your efforts on the right customers, not just any customers, because while you may have thousands of names in your database not all of them are worth your time and attention.  Segmentation and profiling will help your salespeople identify key customers, develop a clearer understanding of their needs, and then tailor their sales communications with greater relevance.

Promotion 

Of course, the nuts and bolts of your product (so to speak) are critical selling points. However, to successfully promote your goods towards a sale, you need to push further. A prospective customer will often look beyond product quality when choosing their preferred supplier. They will also consider things like value-add services, loyalty schemes, unique product bundles and offers. You need to make sure that sales is supported by a productive and proactive marketing function.

Perhaps most importantly, customers will pay more attention to a company that offers expertise and advice. Start producing useful content for your target audience to enjoy. Website blogs, newsletters, and whitepapers, can all address your customers’ key frustrations and questions. This will boost brand awareness and help position your company as not just a supplier of power or hand tools, but as a reliable and informative market leader.

To avoid the perils of commoditisation (as much as is possible), you need to harness the power of data-driven insights. These can enhance your understanding of customers, trends and opportunities. Commoditisation is ultimately worsened by a lack of customer awareness. Don’t reduce your product to a no-name brand. Make sure you know your customers and equally, make sure that they know to buy from you above all others.