The Commoditisation Conundrum

The Commoditisation Conundrum

In his recently published book “Entering the Shift Age”, futurist David Houle writes about the epic transformations that are changing our lives as we proceed into the 21st century, shifting from the Information Age into the “Shift Age.” In this age (circa 2010-2050), change is the norm, the individual has the power, and traditional methods of decision making and authority are disappearing just like dinosaurs.

It’s a digital world

One of the biggest changes is universal access to massive amounts of information instantly available on any device, located anywhere and at any time globally. Even ancient “Baby Boomers” have learned how to quickly navigate the internet to find information about practically anything. Quick access to business data via Google, LinkedIn, Facebook and hundreds of other information portals guarantee that we never go into a business meeting unprepared. It is staggering how much information exists and is being created in this “Big Data” environment. And the future generations – the Millennials and the Digital Natives – demonstrate amazing familiarity and expertise as they effortlessly cruise through Cyberspace.

Since anyone can access this vast amount of free data, it’s a snap to check out competitors and shop for information and bids online. There are dozens of apps available to help with reverse auctions, finding discounts or deals, and evaluating the best bargains. In short, the Internet has trained all of us to shop online and to research online to find the best deals. Why would we expect our prospects to be any different?

The problem, it seems, is how to differentiate yourself and your company from “everyone else.” Since everyone is online, and everyone is offering very similar products/services at basically the same price (or cheaper), what can we do to stand out? How can we avoid being made a commodity? Furthermore, if your entire sales effort can be negated with someone else’s cheaper price, why bother to hire and train a sales team? Why not just sell everything as cheaply as possible on the internet? Why not eliminate sales entirely and do everything over the web?


Chat room take outs:

Echoing the author above…for important buying decisions we buy from people we know, like and trust. Some of course who may not recognise what a professional service looks like buy on price and yes, the cheapest sometimes.

The problem as a business owner myself is I guess where do you draw the line – do you offer the bargain basement service and win the business, then because of who you are provide a top notch service and end up losing money or do you say well actually I offer a quality service, (you are paying me for what I have done and not what I do ie 20 years of successful delivery, I've read the reports, done the groundwork, I know what I doing) and stick to your principals. I think you need to stick to who you are. Clearly this does go back to basic business planning – do you know that you are providing a service people actually want and are willing to pay for. Just because you think it’s a great service doesn't mean anybody else will.

This is a prolific problem in the events, meeting planning and destination management industries. The end consumer is so often not the actual buyer of our service. Sophisticated consumers can often discern the difference of quality service….It is our never ending challenge to present our fees in such a way that they our product is considered for its true, complete value.

We reduced the cost-base of the agency so efficiently, that we got along with the very few customers we do have a long trusting relationship with. We simply deny to work on “budget competition” and tell every customer so. If a customer acts unfair, we bring it up openly and end the cooperation. We use the margin to create new extra quality and service. It is hard in the beginning, but though everyone in the business thought it is ridiculous – it works. Many customers are fed up with low budget, because they understand, that a low budget agency has to either cheat as soon as there is a chance or they cannot deliver the same service.

Bottom line: any meeting planner worth his/her salt researches where they want to go, and have researched the cities/locations they like, to the point of knowing what they will be offered….or why they are not "likely" to go there until something changes? When that happens and the city responds to their resume, perhaps toward a deal then agreements come together in a heartbeat……
I talk to many, I VISIT a few. I would never take my event to a location that I have not been to…… never, never, never. IF the person you are dealing with has not even been to your city, or visited your hotel… HAVE TO KNOW that they are not on the line you are fishing with. They are just stripping the bait from the hook and going to the next line in the water until they find something more attractive. Like all fish they share information about feeding holes, when they are schooled together.
What I have noticed, is that there are a lot more sales people than there are meeting planners and meetings, which means they move from property to property. What that says to me is that the supply and demand curve is not balanced toward success.

Vendor’s viewpoint: We deal with the same problem on a simpler level, and what we've discovered is that when a client wants too much information they are less likely to book us, and more likely to put us through a long, time and energy wasting process before passing our ideas along to someone else for cost reasons alone. To address a variety of issues mentioned in earlier postings, the best potential for a booking comes from a client who knows something about about our work and didn't just pick a bunch of entertainers off the Internet. That's window shopping and rarely has a good result for us. We're happy to give them an outline of what we would provide, but we don't provide enough details for them to farm it out. Planners, we love exclusivity (for individual events). We want to be considered for as many of your proposals as possible, but we can only do that if you tell us who the potential client is. There are hundreds of different events on any given day in our city. We've turned away clients a number of times who tried to go around a planner. If you think a vendor would say 'yes' to that client, don't work with her.

The second point is just an economic reality. Anything that can easily be copied will be commoditized, period. Some customers are only concerned with price and there are competitors who can make money as a low cost provider. Even relationships will only get you so far in corporate environments that have set the process up to drive pricing down, mostly through margin reduction. It's just more fun, IMHO, to compete on a different level where strategic insight, creativity, and sound experience design principles are valued at least as much as a fair price on the commodities of a job.

Eric Winton

Director, New Millennium Business

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