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The UK’s building and construction sector is facing trying times. Thanks to ongoing economic uncertainty, investment confidence is at a low. Major commercial projects have been postponed or cancelled, and growth has stagnated. This is not good news for the economy at large, or for any of the businesses operating in the supply chain.
Undoubtedly, this sector slump will have a strong impact on the sales performance of those companies that supply materials and equipment to construction firms. Competition will heat up and the pressure to outperform rival companies will become immense. Smaller suppliers will feel the bite more than their larger competitors. Bigger businesses are typically able to undercut on price, flood the market with a multitude of product lines and invest more in new technology.
As a result, smaller companies risk being completely shut out when it comes to achieving market share. They face three seemingly insurmountable roadblocks: price, commoditisation and admin. Fortunately, there are ways in which they can overcome all three, and in the process, become more nimble and competitive.
As production processes have simultaneously become more advanced and more cost-efficient, more companies have become able to manufacture large numbers of products. This has flooded the construction sector with affordable tools and equipment. However, with increased availability comes commoditisation. Key markets like construction materials and equipment, as well as consumer electronics and automotive, have been hugely affected and now, it’s very difficult to tell the difference between similar product lines.
With more companies producing more or less the same products, buyers are spoiled for choice. The consumer’s ability to perceive notable differences between the product lines offered by different suppliers has steadily diminished. And, when one supplier’s cement mixer, for example, offers the same features and benefits as another’s, the final purchasing decision often comes down to price.
This has led to an unhealthy tendency towards discounting. It’s a common response to commoditisation – and, while effective in the short-run, it can damage a business irreparably over time. Discounting secures quick and easy sales, and gives the sales ledger a nice spike in revenue. However, consistently undercutting competitors on price won’t encourage your customers to stick around and spend more with you. The more bargains a brand offers, the more they become known as a ‘bargain brand’ that only attracts one-off customers looking for a cheap deal.
To avoid discounting, companies need to ensure that no single person or team within a company has sole control over pricing. Individual agendas can push product prices up or down beyond the market norm. Suppliers need to make sure that the price of their products is determined by their customers’ needs and interests – not the sales or financial director’s business agenda.
Price cutting should always be the last resort. If your product line doesn’t stand out in the crowd, you should first consider other tactics like improving convenience and personalisation to influence a purchasing decision. To do this effectively, you should consider putting more effort into getting to know your customers better.
Being able to offer superior convenience and personalisation requires identifying and pursuing bespoke cross- and up-selling opportunities. Customers will often look at the whole package. If they are offered a great deal on a well-timed bundle of relevant goods – they are less likely to make a purchasing decision based on cost alone.
In the fight for market share, commoditisation is an increasingly tough opponent. The good news is that there are ways to combat its negative effects. Differentiation, for example, is a powerful tactic that can help businesses push back. At its most simple, it means selling products that are unlike any others on the market. Unfortunately, for suppliers in the construction sector, this is no easy feat.
Some suppliers may consider diversification and invest in new product lines, or work with manufacturers to design modifications to existing equipment. While upgrades are important to keep goods relevant to customer needs, diversification involves a significant amount of risk and resources. However, it’s an expensive way to differentiate products, and smaller companies may not have the budget.
Differentiation can also refer to adding value for customers over and above the product. Even suppliers without huge resources can look at bundling value-added services into product deals. This could be something as simple as offering free delivery, or something more product specific like consultancy, stock management, and training services. Going above and beyond will pay off in the long-run. Customers almost always come back to the company that makes them feel most valued.
Running a business smoothly involves a considerable amount of admin. It’s a necessary evil that simply has to be done. However, when the volume of admin is so great that it ties salespeople to their desks and prevents them from seeing to their customers, there’s a problem.
On a typical day, a salesperson has to create reports, update spreadsheets and prepare for meetings. These tasks shouldn’t restrict and distract salespeople from their core responsibilities: winning new business and growing existing relationships. The problem lies in outdated and manual processes. Too many suppliers lack access to new technologies and still use slow and inefficient methods to manage their admin.
Smaller companies need to update their systems and processes. Software with automation capabilities can boost efficiencies and liberate their salespeople from deskbound admin. Mobile apps enable salespeople to tap into critical information from anywhere and at any time, and data analytics helps them understand customers’ needs better. This combination of insights and agility will help these companies dominate market share.
To overcome any reluctance to adopting new technologies, suppliers need to change their mindsets. They need to realise that many types of sophisticated software, such as customer relationship management (CRM), business intelligence (BI) and Enterprise Resource Planning (ERP), are redefining how companies do business. Traditional suppliers that wish to withstand the current problems in the construction sector, need to move with the times.
Article submitted by Paul Black, CEO, sales-i
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