Differentiation in a commodity market

This company designed and manufactured computer communication products in a commodity market where Far Eastern imports were available at lower prices and sometimes higher quality. Its revenues were in serious decline.

In order to achieve sales targets; the company used to make special end of quarter, half-year and end of year promotions to its OEM channel (the major European computer manufacturers) with ever increasing discounts.

The OEMs quickly caught on and bought at the lower “end-of period” promotional prices! Discounts were increased to such an extent that the products were sometimes sold at prices lower than the cost of manufacture.

To make matters worse, to try to be more price-competitive they were sourcing components from the cheapest suppliers and manufacturing products in Malaysia. This sometimes resulted in poor quality products which had to be replaced under warranty at no cost to the customer, but at considerable cost to the company.

I joined as European OEM Sales Manager. When I became aware of the previous unprofitable sales practices I served notice to the OEMs that there would be no more end-of-quarter/half-year/year deals. I had to find a better way to compete in this commodity market.

So, to differentiate the company from the others in the market, who all typically sold products in low volumes to their customers, I introduced a new strategy to promote the company as the specialist (low-risk) supplier of choice for high-volume projects.

Despite having no authority for manufacturing I led an initiative to move manufacturing back to the UK to a higher quality manufacturer who used quality components and was easier to manage, being in the same time zone. This was going to be key as I wanted to enhance the specification of some products, improve quality and logistics to demonstrate we could deliver high quality products in large numbers to support our customers’ projects.

This resulted in several new orders, each in turn being the largest ever won in the history of the company, and by some considerable order of magnitude. Products were sold at decent profit margins too due to the differentiation I had created for this company.

The OEM channel grew by more than 200% in one year at a time when the rest of the company shrunk by 25%.

As a result of the strategic thinking and change management capability I introduced, the company appointed me as Marketing Director to develop their longer term strategy.

At the end of my contract the company had quality products, was profitable and was later bought as an attractive going-concern by a US organisation.