The importance of
maintaining your business cannot be overstated. It is difficult to win key contracts and
product positioning and, if this is lost, it can be lost-for-good.
What can you do to maintain and grow your customer's reliance upon you,
your products and your services? How can you help them to continue to justify your
product’s cost (for example) when a non-clinical influencer may be pushing in that
direction? And what do you do when a competitor decides to take a low-cost strategy
against you?
Customers face numerous costs when they change from one product or one
supplier to another. These "switching costs" should be considered when you are
attempting to replace a competitor and when you are the current "holder of the high
ground." The switching costs will be in both "hard" and "soft"
dollars.
In considering possible changes from one supplier to another, a
customer will look at all of the potential costs involved from all potential providers. To
be successful in growing or maintaining your product, you need to consider these switching
costs from the perspective of your customers.
If you are attempting to defeat and replace a current supplier, you
must prepare a strategy, which considers the ease of implementing your product into the
current protocol or clinical regimen. How difficult, for example, is it for a surgeon to
change a component such as an adhesive when he or she has been using the same product for
years. Any additional change in these areas is a "cost" in the mind of your
potential customer. And when surgeons are evaluating their total OR time, as they are now,
such a seemingly simple alteration can have dramatic effects.
Let's consider some of the switching costs that might be involved. The
most obvious type of cost is the investment of time and money that customers must make to
adapt to new products. Your customers may invest in money; in people (by way of training);
in comfort of a current product; and in procedures or published treatment or diagnostic
protocols.
The larger the required investment, the greater will be your customer's
reluctance to change and expose him or herself to possible product complications or
failures. Research has shown that this factor along with change in a long-standing
procedure is one of the most difficult obstacles to positioning a new product.
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Fear of immediate
disruption and unsatisfactory performance can make a customer reluctant to change. Your
customers will feel less exposed when they buy products important to their own operations
if they buy from companies with strong and proven reputations. A clinician in today’s
market is more likely to go with reputation or others’ experiences to guide their
thinking.
Another behavior that customers are increasingly adopting is the one of
spreading the share of products across several supplier companies. They feel that this
position helps them to make moves more easily and rapidly when necessary. Customers feel
that this is a good position for ensuring price competitiveness and product quality. This
is also good for the person who is currently on the "outside looking in" in
terms of product placement.
The flip side of this position is the move toward quality. This quality
focus tends to focus customers on gaining relationships with a smaller number of providers
(however, there will usually be at least two) who are willing to work closely with them to
provide products and services necessary to help raise quality and lower costs. By limiting
the number of providers, customers are able to commit to larger purchases with more
stringent demands on product and services.
The bottom-line for sales success is to determine what you can do to
show increased value in either maintaining business with you or switching to your products
from another provider.
Consider the following:
- What are the costs involved for your potential customer to switch from a competitive
product to yours?
- What is the risk or exposure involved in changing?
- Could a switch have a potential negative impact on your customer's career or reputation?
- When you have successfully won the business (or if you currently have it), build your
customer's switching costs by providing valued services.
- Be ready to show your impact on business goals, quality and customer satisfaction.
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