Into the Fray

Gotta love a little tension. Our digital signage news aggregator just pulled in an interesting and inflammatory piece, jumping all over price issues within the industry. It’s interesting watching it all go down.

I recall doing a case study on the price war within the cold cereal industry. For some time large players like General Mills were making huge margins on cold cereal. In fact, the article I read talked about how the cereal used to be measured in cost per pound. It was exorbitant. Enter Malt-O-Meal! Their low prices and low shelf placement made them a fierce competitor to the status quo and forced prices to equilibrium.

When margins begin to dwindle.

Margins need to come into equilibrium. Do you remember when Internet hosting use to cost $60/month. Now, if you pay more than $5 to $7 month for a simple website, you are a fool. I even wrote about software providers who’re still charging ridiculous fees for their digital signage SaaS hosting. How long with the industry be able to bare the weight? Not long. While enterprise solutions will still require a greater investment in capital, it should be apparent that the days of $2,000 per display are over.

Adaptation

Like it or not, the industry is moving to the cheap. Realizing the evolution has been forced into light speed by the general market, will help you to realize your business model needs to change.

While I am against competing based on price, we all must realize that it is coming to that. I read a great book a while back by Tom Reilly called Value-Added Selling. It is an excellent book outlining how to sell and sell effectively. One of the most interesting stats from the book indicated that when salespeople complain the price is too high, it is generally only the salespeople who struggle with the higher prices, not the customers. Price is more of a concern in the minds of the salesmen, than it is in the minds of the customer. That is a numerical statistic. One of my favorite quotes from the book:

Value added salespeople sell three things—the product, the company, and themselves. This three-dimensional solution defies commodity-like comparisons. The same product from the same company from two different salespeople is two different solutions altogether. Logically, there can be no generic solution because no two people are the same. To reinforce this point, the only differentiation that may exist in this competitive comparison could rest with the salesperson.

Two Fortune-100 companies surveyed their customers to determine how much value their salespeople contributed to the sale; they discovered that 35-37% of the value that customers receive comes from the salespeople with whom they deal. Value added salespeople don’t make sales calls; they go on job interviews with customers. They ask customers to hire them to be their personal representative with the supplier’s company.

However, it is also great to realize that perceived value is often housed in a pricing structure. Consequently, dropping your price to the lowest industry price-point would not only kill your revenues, but makes you look like the pimped-out hooker of the hood. No offense.

It all really depends on what your business model is. What is it? What is your method of distribution?