Are Your Competitors Targeting You? Three Ways to Get Out of The Bull's Eye

The following is a guest post by George Brown, co-founder of Blue Canyon Partners, a Chicago-based consulting firm. He is also the co-author, with Atlee Valentine Pope, of CoDestiny.
Summer is hunting season for new clients and vendors as companies consider their Q4 focus and 2012 targets. Have you seen the Far Side^TM cartoon that showed a deer with a target on its chest? The caption has another deer commenting, "Bummer of a birthmark, Hal". I use this cartoon to reflect the way that many firms serving business markets feel these days, with their organizations the ones sitting squarely in the bull's-eye, with supply chain managers and competitors alike taking aim on an ongoing basis.
The challenge faced by such firms involves the threat that they will have to succumb to the vicious cycle of price-based competition, resulting in the erosion of their profit margins and the denigration of their products to commodity status. Neither is a pleasant prospect.

Here are three instances in which it's almost always correct for a firm to assume that it's sitting on the bull's-eye:
1. If your firm is among the largest suppliers to a customer, assume you're on the bull's-eye. Your competitors are thinking "Wouldn't it be great to supplant them?" and the purchasing managers in the customer organization are thinking "We'd be heroes if we can get a couple of percentage points off that bill".

2. If your firm's ingredients or services are among the largest elements of the cost structure of a customer's product, assume you're on the bull's-eye. Competitors think "This is where we want to be, because that's where the money is", and purchasing managers see that "a dollar saved here drops right to the bottom line, and there are a lot of dollars that can be saved on that ingredient."

3. If your firm's products are among the highest-priced products bought by a customer, assume you're on the bull's-eye. Competitors say "Let's take that high-ticket business", and purchasing managers say "It takes as much work to get concessions on a $1000 product as it does on a $1 product, so let's go for the elephants and let the ants alone."

So what can you do to move yourself out of the bull's-eye? Here are three solutions:

• Raise the bar. Don't let your competitors or a purchasing manager convince you that price is all that matters. Most likely, the way you won the business in the first place was through a superior product or great customer service, along with acceptable prices. Think about how you can "raise the bar" in terms of product attributes and services rather than succumbing to the belief that price is all that matters. Don't create a double-edged sword and use it to cut your own throat - one edge by participating in a vicious cycle of price-based competition unnecessarily, and the other edge by cutting back on the product and service elements that allowed you to be successful in the first place.

• Anticipate challenges. And take proactive steps to thwart them. A simple version of this strategy says that it's always smart to anticipate future price competition, and always smart to have a plan already implemented to avoid problems when it happens. There are many great examples of companies that put a plan into place to lower their prices and at the same time improve their margins. The trick was taking proactive steps to develop such strategies before the gun was held to their head.

• Know what constitutes a "win" for your customer. The third strategy for managing life on the bulls-eye is the most important of all. It involves thinking about what creates a "win" for the customer. There is no better way to blunt a competitive threat or to disarm a supply chain challenge than to have advocates from within the customer organization say "This supplier is critical to us and is doing a great job." Understanding what constitutes a great job and what creates a win for the customer is the route to creating champions in the customer organization who will make such a statement. When you build a cadre of customer champions, the bulls-eye can feel more like a spotlight showcasing the supplier that is getting the applause.

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Photo courtesy of Flickr user HA!!!, CC, 2.0