Rising production costs are a reality you have to deal with as a B2B marketer, often as a result of increases in wages. The increase in costs challenges you to revise the prices of your services or products. But how do you stay competitive in the market despite these price increases? In this article, we will show you options to manage this challenge.
The impact of rising production costs on business costs and pricing
Whether it is costs for labor or materials, production cost increases can lead to higher operating costs, which can ultimately result in higher prices for your products or services. If you don't manage this carefully, it can affect your competitive position in the marketplace.
The Power of Value Over Price
While you may be forced to raise your prices, this does not mean that your customers will automatically look for cheaper options. What really matters is the value you offer. You can convince your customers to buy from you by highlighting the unique value of your products or services.
How do you do this? Start by identifying the specific benefits and features of your products or services that set them, and you, apart from the competition. What are the results your customers can expect when they choose your company? Perhaps you offer exceptional customer service, unique features or proven results.
Communicate this value clearly in your marketing materials, sales calls and customer interactions. Show your customers that they’re not just paying for a product or service, but for a solution that can improve their bottom line.
Staying competitive despite rising production costs: five strategies for success.
There are several strategies you can use to stay competitive despite rising costs. Here are some strategies to consider:
A B2B marketing agency like Living Stone can play a crucial role in implementing and communicating these strategies. Here’s how:
Clearly, a B2B marketing agency can play a key role in helping companies navigate the challenges of rising production costs and remain competitive in the marketplace. By working closely with organizations, these agencies can provide valuable insights and strategies that can lead to long-term success.
Rising costs for production can be a challenge for B2B marketers in mid-sized companies. It leads to higher costs and prices, which affects your competitive position. By emphasizing your value proposition and developing strategies to remain competitive, you can overcome this challenge.
Remember that price is only one factor in your customer's decision making. Value is just as important, if not more important. Show your clients that the value you offer justifies the higher price, and you will be able to grow and remain successful despite the challenges of rising production costs.
A B2B marketing agency like Living Stone can get you started and guide you in rolling out competitive strategies that safeguard or even strengthen your market position.
Footnotes:
1. This article provides some relevant references of studies on the subject: Strategic Bundling of Products and Prices: A New Synthesis for Marketing, Stefan Stremersch and Gerard J. Tellis, Journal of Marketing, Volume 66, Issue 1, Jan 2000. Online: https://doi.org/10.1509/jmkg.66.1.55.18455
2. See also: Customer Retention Is King: The Future Of Retention Marketing, Jerry Jao, online at https://www.forbes.com/sites/jerryjao/2015/01/21/customer-retention-is-king-retention-marketing-provides-greater-roi/?sh=60e20c5232cf
3. Homburg, C., Wilczek, H., & Hahn, A. (2014). Looking beyond the Horizon: How to Approach the Customers' Customers in Business-to-Business Markets. Journal of Marketing, 78(5), 58-77. https://doi.org/10.1509/jm.12.0529. This article provides an interesting roadmap for a B2B supplier to implement indirect customer marketing.
4. Value-Based Differentiation in Business Relationships: Gaining and Sustaining Key Supplier Status. Wolfgang Ulaga and Andreas Eggert, Journal of Marketing Vol. 70, No. 1 (Jan., 2006), pp. 119-136. This research examines opportunities for differentiation through value creation in business-to-business relationships. Results suggest that relationship benefits exhibit stronger differentiation potential in key supplier relationships than cost considerations. The authors identify service support and personal interaction as key differentiators, followed by a supplier's know-how and its ability to improve a customer's time-to-market. Product quality and delivery performance, along with acquisition costs and operating expenses, show moderate potential to help a company achieve and maintain key supplier status. Finally, price has the weakest differentiation potential.
5. An interesting article around pricing in B2B can be found here: "The Secret to B2B Pricing in a Digital World. The tools are getting better, but they're no substitute for strong pricing capabilities." By David Burns and Justin Murphy, August 01, 2018, online at: https://www.bain.com/insights/the-secret-to-b2b-pricing-in-a-digital-world/ It includes a section on "New pricing models continue to disrupt industries," specifically the shift from a CAPEX to OPEX model.