And, yes, almost all buyers will ask about price — and most buyers want a lower price. So, don’t be surprised when the subject comes up! Instead, prepare for it. Know how you’re going to present price, discuss price, and negotiate price before you approach the topic. If you don’t have a plan for this, don’t worry, the buyer does — and you may not like it. Enough with sellers. Let’s talk about buyers and the dangers of buyers commoditizing a product or service that shouldn’t be commoditized. The biggest danger is risk. When we look to commoditize a product or service, it means we focus on price almost at the exclusion of feature set or specifications. Assuming that a buyer can successfully ensure an “apples to apples” comparison, then price is a logical thing to focus on. But it’s in getting to the comparison that buyers often take shortcuts and falsely create an “apples to apples” comparison. Our advice to buyers is to first understand if what you’re acquiring can be commoditized. If any of the following conditions exist, you might not be dealing with a commodity: • It’s difficult to acquire (e.g. there are few players in the space). • The specifications for your need are not clearly defined. • There’s a high cost to change suppliers. • You typically work with only one (or maybe two) suppliers at a time.
If any of the above conditions exist, it may indicate that creating an “apples to apples” comparison will be difficult. In order to make the comparison, you’ll have to oversimplify your specifications. When you do that, you run the risk of acquiring a product or service that doesn’t meet your needs, or you set yourself up for a situation in which you’ll have to spend more in ad hoc fees to your supplier to get the solution that meets your needs. In these circumstances, forgo commoditization strategies and shift to a strategic sourcing model that focuses more on the benefits of the solution than the price of the solution. Commoditized buying and selling have their place. But issues arise when we try to commodify something that shouldn’t be commodified. For sellers, it means getting devalued and being forced to compromise their solution to meet a price objective. For buyers, it means risking purchasing something that doesn’t meet their needs and potentially having to spend more to get what they actually wanted. All of which can lead to longer negotiations, compromised relationships, and needless wastes of time. “Issues arise when we try to commodify something that shouldn’t be commodified.”
“Commodities are all about price.”
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