Friday, February 01, 2008
McKinsey Quarterly: Shedding the B2B Commodity Mindset
The latest issue of McKinsey Quarterly has an excellent article on elevating B2B products above the commodity level:Is the soap you buy really different from the competition? Probably not, though consumer goods companies know how to differentiate their products by building strong brands. By contrast, companies that sell things such as bulk chemicals and steel to businesses, burdened by the notion that these goods are commodities, churn out more and more product more and more cheaply and then sell as much as possible at the market price. Yet in many B2B markets, nonprice factors might be responsible for as much as two-thirds of a customer's buying decision.The conventional wisdom is that price is the only real differentiator in B2B products, that nonprice and touchy-feely things like branding don't really matter, but as the article points out, that simply isn't the case.
For one data point that supports the article, I think back to my days in printing, where I dealt with a lot of paper suppliers. Most kinds of paper are without a doubt commodities, especially common versions like 20# white. You can get just about any kind of paper from just about any supplier, which I did when I placed my paper orders every day. I rarely bought from the cheapest place in town. Instead, I bought from the supplier that was most reliable, with better inventory management systems that meant they were almost never out of what I needed. I paid a higher price, but it was worth it to me because it meant one less round of phone calls I had to make everyday, which was worth a lot to me.
Check out the full article here. Free registration is required, but it's more than worth signing up.
Labels: innovation, product development
posted by Finn McKenty at 2:48 PM
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