Article
Superior market differentiation may help you increase prices by 5-20% and volume by more than 7%
Published
6 May 2024
If your business is driven by renewals of contracts with customers or by launching new premium solutions, you might be missing out on profit and revenue potential.
Although you spend a lot of effort trying to differentiate yourself in the market, you may recognise one of the below experiences:
- Customers are failing to see why they should choose your product or service over a cheaper alternative. In each interaction you have with them, they treat you like a commodity provider and pressure you on price.
- Your customers’ procurement departments are gaining more leverage. The result is that your customers’ procurement departments demand higher discount rates to the point where you lose your profit margin.
- Competitors are becoming more aggressive. As a result, competitors win business from you by undercutting you on price.
In each case, you are forced to hand out discounts or risk losing the deal. As a result, you fail to realise your profit and revenue targets.
The problem is not going away. As you continue, you set a precedent for lower pricing, and you reduce your ability to acquire and retain customers to one factor: lowering your prices.
The consequence? Lower profit and revenue.
Achieving superior market differentiation allows you to command higher prices and secure more business, directly boosting profits and revenue.
Superior market differentiation may help you increase prices by 5-20% and volume by more than 7%.
Furthermore, research supports the strategy of achieving superior market differentiation. Studies indicate that firms and salespeople who excel at conveying their unique value propositions to customers consistently achieve superior sales performance.1
The value of strategic market differentiation
Cases
Cases of companies that succeeded in winning business at a higher price
Superior market differentiation can help you win business at a higher price, directly increasing profit and revenue. One study showed that average discount rates drop from 26% to 11% when respondents agree that “value propositions are developed based on customer needs and value” rather than being neutral.2 That is a 20% increase in price. Likewise, our clients have succeeded in increasing prices by using superior market differentiation. Below, we describe two cases.
Implement Consulting Group cases
| Shipping | This company wanted to open a 5% premium over its rivals in 3 years. In the first 9 months alone, over 75 success stories worth USD 40 million EBIT were created with superior market differentiation. |
| Life science | This company was losing margins when renegotiating multi-year contracts with customers. Using superior market differentiation, salespeople were able to increase prices by up to 10% when renegotiating. |
Cases of companies that succeeded in winning more business
Superior market differentiation can also help you win more business and increase revenue. One study showed that customers are 8-13% more intent on purchasing when they have been exposed to best-practice messaging.3 Again, our clients have succeeded in winning more business by using superior market differentiation. Below, we describe 4 cases.
Implement Consulting Group cases
| Marine services | This company wanted to stand out from competitors and grow its business faster. Using superior market differentiation, the company doubled its tender win rate from 23% to 45%. |
| Courier services | This company was struggling to stand out in the market. Using superior market differentiation, it increased its win rate with new customers by 8 percentage points. |
| Logistics | This company wanted to grow its sales volume. Using superior market differentiation, it increased its sales volume by 12%. |
| Manufacturing | This company wanted to grow its revenue. Using superior market differentiation, the company achieved 6-7% additional annual growth. |
The case for strategic market differentiation is stong
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Sources
1. Terho, H., et al., How sales strategy translates into performance: The role of salesperson customer orientation and value-based selling, Industrial Marketing Management (2015); Mishra, S., et al., The effects of an articulated customer value proposition (CVP) on promotional expense, brand investment and firm performance in B2B markets: A text based analysis, Industrial Marketing Management (2020)
2. Implement Consulting Group, Value-based strategies survey (2023)
3. Corporate Visions, Four Value Conversations