Expert's Panel

A collection of timely and important topics posed to our panel of experts.

How do you compete with a company whose product is far inferior, technically, reliability, and with innovativeness, but it has the resources to give the product away and gain market share?

 (ep1053)
1. If you have the situation where you really did mess up with one or more customers, it is good to open the door and be honest about your dirty laundry. I had a real situation where the customer service problem was the result of a senior executive. Several months later, his deficiencies were recognized and he was moved to a different organization. I went to the offended customer and told him that it took us some time to recognize the problem, but we did and it has been take care of. I did this without downing the moved executive and indicated he had been transferred to an organization where his special talents could really be put to use. The relationship with that customer became even better than it was before the problem.
2. Another area to differentiate yourself is to partner up with a couple of customers to produce something the industry needs. You don't necessarily build the entire device, but it will have a lot of your product in it. An example is one of the most popular devices for 300mm tool sets is the pod loaders for the foops. There are a lot of companies that make pod loaders and there is a big drive to reduce costs. Most of them are electrical drive oriented where the movement is going pneumatic because it is more cost effective. My company partnered with a company to produce the first totally pneumatic one which under priced everyone in the market. We do joint customer presentations and have captured a big part of the market. It helped us to differentiate ourselves as a broader product based company.
3. There are two types of give-aways. One is giving away a number of free samples to prime the pump. If the competitor is doing that and you are not, you probably need to—that is a cost of marketing and, in this industry, you need to be careful with that. If, on the other hand, the competitor is giving product away to gain market share, the best thing you can do is to leave the clearing, hide in the bushes and wait because the competitor will die. With the exception of love, if it is free it has no value to anyone. I have seen this situation a number of times and the company that is doing the give-aways does not exist very long.
4. Be sure that the competitor doesn't just have a good product they can produce cheaper and sell cheaper than yours. It is also possible that the customers may look at being tied to the big company that will be here tomorrow versus your small company, that may not be here tomorrow.
5. There is another moderately well known sales strategy when the competition is trying to "buy" your key accounts from you. Have your sales force go out and approach their key accounts, even knowing you will not get their business. Part way through the sales presentation, the account manager says, "I know it will be difficult for us to get your business since competitor X gives everything away free." It can get very expensive for this competitor when their key accounts realize they are paying higher prices than others. It is an uncomfortable procedure, but it works.