You have led your business for several years. For sure you see that in many disciplines costs of entering to market (including also your market) are lower and lower. The time which is indispensable to lead a company is also shorter and shorter. Your money which is needed to run the business in your branch is lower and lower. Technical progress accelerates and allows offering more advanced products. You see, that also in your branch, as in many different branches, supply significantly dominate on demand. An additional globalization and international contracts cause deteriorate of barriers. They facilitates your competition, even from far countries, compete on local markets. In consequence products undergo commoditization. Through mass competition the products of different companies become to be more similar to each other. The consequence of products commoditization is decrease of markups and standardizing of market offer. From customers point of view products of different companies become to be similar each other, they loss unique features, uniqueness. If you want sell products in this kind of market, you have to decrease your prices. Reduction of prices inevitably leads to generate by companies lower markups and destroy the market. Commoditization of products is particularly strongly visible for instance on IT services market, accounting services, legal services, SaaS applications and clothes or shoes.
In 90th of XX century commoditization called hyper competition. In the Internet was more popular the sentence: `Your competition is about one click further`. And that is now. You have full awareness of it. You know that every day you loss, do not gain customers who choose other offers.
Staying on desert and build it leads to nowhere. It is the strategy for survival, but not for development and expansion. Extension on desert is identifying with stagnation, more and more marketing costs, lower and lower markups and exhaustion of competing by price.
Staying on desert, your area of comfort always looks very similar:
- You create the www website which is for image building or offer presentation (so-called image website or product website)
- You show what you can offer to customers and invest much money in it, to show them this offer. The success depends on if you can advertise in the right time and place – in this way that the customer who looks for a product (service, good) from your branch finds exactly your company. To achieve the most important business targets (especially profits, which you would like to, have from your business) is in this case very hard. Mainly, if the customers are not fond of brand and it is very hard to obtain their loyalty.
- This way of business management does not guarantee you appropriate profits because one more point – the customer will compare your offer with competition. Of course, you can take care of your offer and make it the best, but you do not avoid the situation that you become to be one of others – several companies, which at the same time go through `casting`. Before you have not invited to the meeting, you had only promised in shape of graphics and words. Your competitions do the same: words and graphics.
- In extreme cases you have to compete of price and you know yourself, how is hard to explain the customer, that cheaper and worse product simply is not pay off. So you send next offers, pay for advertisement, send and pay – and so on to infinity.
- To break out of this trap, you can create your own waterhole. It is not very costly; most of the companies have money to do it. You have to only leave your desert and become to be waterhole inventor, which is next to you.
