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Good Branding Helps Distributors Avoid the Race to the Bottom

By Bridget McCrea

More than 10 years ago the International Journal of Research in Marketing researched the impact of brand credibility on buyer price sensitivity and came out with a profound statement that still rings true today:  Brand credibility decreases price sensitivity. In other words, strong branding tactics go a long way in helping companies avoid the “race to the bottom” in the price war that – since the Journal’s research was published in 2002 – has gained ground across most industries.

For electrical distributors, the message in 2014 is simple:  By proving your brand’s value and establishing a strong market presence, you won’t have to offer deep discounts to the get the order. Instead, you’ll be able to develop lasting relationships with customers that come to you not for the lowest price, but for the absolute best value, service, and products. Here are six ways that you can use good branding tactics right now to start combating the price-choppers and to maintain steady (or even rising) price points:

  1. Use your brand to differentiate “value” from “pricing.” In the white paper, The impact of discounting on brand equity, Killian Marketing states that “the most powerful value contribution of a strong brand is the ability to demand and defend higher prices than competitors. Since powerful brands produce higher margins, discounting can be a sign of weakness: brand demotions.” But prices are temptingly easy to change. Enter discounting, a temporary price reduction intended to increase sales over the short term. “Sounds harmless enough,” Killian says, “We’ll have the same quality, with a lower price, so we’ll become a greater value. That’s when problems emerge. For an established brand, discounting can have an adverse affect on value.”
  2. Make an effort to gain competitive awareness. Look at what your competitors are doing online and offline to brand and differentiate themselves. What do they have that you don’t? And – even more importantly – what do you have that they don’t? What are they doing to make their customers more aware of their value and services? When you come across gaps in your own firm’s branding strategies, figure out ways to fill them in. A customer marketing survey, for example, can help you pinpoint areas where your competitors may be doing more or offering more to its customers. “Most small to midsized firms do a poor job of assessing all of the competitive alternatives that are on the market,” says Mark Faust, principal at Echelon Management in Cincinnati. “That leaves a lot of open doors for the firm that takes the initiative to gain competitive awareness.”
  3. Develop a list of positioning points for your distributorship. After coming up with a list of your customers’ competitive alternatives, develop a list of positioning points that highlight competitive uniqueness (unique points about your firm), competitive advantage (where you stand out in the marketplace), competitive equality (areas where your firm is similar to the rest of the distributors), and competitive weaknesses (where improvements are needed). Be as specific and accurate as possible when developing this list by avoiding general statements like “we’ve been in the business for 50 years.” Instead, use verbiage like, “we are on call 24/7 for our electrical contractor customers” or “we have a support staff that is 100 percent up to speed on new products and services.” Remember that every company has a weakness (or two), says Faust. “Be sure to hone in on those weak points,” he advises, “and come up ways to reposition each one.”
  4. Find new ways to provide extreme value.  One of the best ways to avoid the price-choppers and establish your distributorship as the best in its field (not the one that will drop prices on a whim), is by providing extreme value to customers. For example, most customers don’t know exactly what components they need or how to install and use those products. “Find out if your customers could use consultation around product selection, implementation, and/or maintenance,” advises Phillipa Gamse, author of 42 Rules for a Web Presence That Winsand a Capitola, Calif.-based digital marketing consultant, “and then develop relationships based on providing more value around those specific points.”
  5. Use tools like online video to promote your distributorship’s value. Providing value doesn’t have to be expensive or time-consuming, but it can be a very effective way to establish your firm as more than just the “low price leader.” A series of installation videos uploaded to YouTube or a corporate website, for example, can be used across multiple customers without much extra effort on the distributor’s part. “If your customers are walking around the jobsite with mobile phones in their hands,” says Gamse, “a simple, 3-minute instructional video will be much more valuable than a written manual or verbal instructions.”
  6. Keep your customers in mind when building a branding strategy. Today’s workforce spans three generations – not all of which are tech-savvy. If your customer likes poring over the hard copy of a catalog, then make that format available to him. If he’d rather access product information, part numbers, and pricing online from a mobile phone, then make sure your website can accommodate these preferences. “You have to be able to communicate with the age group that you’re dealing with, even if it means offering a few different options,” says Mike Justice, president at GridConnect, a networking products manufacturer in Naperville, Ill.

Ultimately, Justice says that if a company doesn’t take the time to build a brand and create value for its customers, then it will wind up getting beat up on price. “We try to add value on every order that we can, whether it’s pre-configuring products to certain specifications or installing pre-loaded software for them,” says Justice. “In return, our customers are usually willing to pay a little more for that service and we can avoid the discounting problem.”

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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