Not a Commodity

I Recently came across an excellent thread on LinkedIn about the importance of promoting value over price. I was especially intrigued by some comments from Scott Snyder, customer accounts manager at Sunstate Equipment, who urged rental businesses to resist the impulse to lower prices in order to gain new customers.

To start with, Snyder points out that every company's value proposition is different, particularly as it relates to the specific market or industry they traditionally serve. Before the economy took a nose dive in 2008, most companies had enough business from their core niche customers to fine tune their value proposition to the markets they served. The better they got at serving their niche customers, the more their value increased, allowing rates to rise as well.

During the recession, the business levels of their niche customers spiraled down dramatically and each company had to find other market niches to keep their fleets busy. Often, they didn't have the right fleet or support programs to effectively serve these new markets, but since they provided some additional utilization for their idle fleet, many didn't mind that their value to these markets might be low.

"Unfortunately, when your value is low or unknown, it seems the only way to attract attention is to make the competition look over-priced by lowering your rate and claiming to 'save them money'," Snyder says. "But value comes from being able to lower your customers' costs, not lowering your rate."

You'll never be able stop competition from coming in at a lower rate, but Snyder says if they do, then they're admitting they have little or no value to sell to that industry.

"Make sure you and your company understand the value these new customers need from you in order to be the lowest cost, and then make sure your company can operationally meet or exceed their expectations," he says. "With your niche customer base, never give up on your value proposition. Equipment rental is a service, not a commodity and a lower cost beats a lower price every time."

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