If your product is approved, trusted, and even specified—why does it keep disappearing at bid time?
I recently had a frustrating question presented to me by a leading engineer from a major petrochemical end user: “Why don’t I ever see your number on projects?”
“Because we’re not the cheapest,” I said.
“But what if I want to buy your product?” he responded. “Why can’t I at least see your number?”
Unlike the first question, the answer this time did not immediately come to me. And I had to ask myself, why can’t an end user who wants to buy my product at least be given the option to compare my bid with the cheaper competition? Was this the distributors’ fault for simply leading with the cheapest 'approved' option from the many bids they received?
But instinctively I knew that that was only part of the problem. Because when an end user wants to buy your product, price alone isn’t the real issue.
I thought about the old saying about a tree falling in the forest when no one is around to hear it and rephrased it in my mind—if I quote a distributor on a project, and they don’t send my bid to the end user, did I even quote the project at all?
Why Not Just Sell Direct?
To someone from outside the industry, a simple solution would be to simply sell direct to the end user. Bypass the middleman. And while technically this would save the end user money, and effectively lowering their price, the reality is that this type of market strategy simply doesn’t work long term for the majority of manufacturers in PVF.
For one thing, manufacturers tend to not have the people resources in customer service or the bandwidth to handle the demands and wide variety of products required of EPCs or end users. This is why distribution is such a vital part of the supply chain and why manufacturers remain dedicated to our stocking distributor partnerships, because we understand the value distributors provide. But that being said, due to the complexity
being said, due to the complexity of the various end users and customers they supply, distributors must have multiple partnerships with other manufacturers, including our competition. Which means none of us can rely on distributors to be our champions when it comes to bidding time. That responsibility belongs to us—not our distributors.
So how can manufacturers prevent their value message from getting lost inside the channel?
The Commodity Trap of AMLs
Another complication or headwind for those of us who will never be the cheapest is that the end user AMLs tend to be generalized with 10+ manufacturers “approved” within the same product category. This means, at least on paper, manufacturers are being treated as a simple commodity, especially when these ‘approved’ lists begin to read more like an old yellow book listing the names of every PVF product that the end user has ever installed in their facility.
No differentiation exists on paper, meaning there is no tier system based on past performance or quality record. By this process, if we are all ‘approved’, then everyone looks the same.
And when everything looks the same, price wins.
But is this really what the users of PVF products want, the cheapest stick-of-pipe or valve they can get? Spoiler alert, the answer is no. If that were the case, then many of the manufacturers within the PVF Roundtable would already be out of business.
What Customers Buy vs What They Actually Want
So if we are to have any chance at all of escaping the cheapest price trap, the first step is to change the conversation with the end user and stop being a number.
To begin, ask yourself: What do customers actually want, not what they buy? In a different scenario, imagine you are a drill bit salesman. Although what your customer buys from you is a drill bit, what they actually want is a hole. This means we need to think in terms of outcomes, not products.
And to fully understand how we can help the end user, we must identify both their most and least desired outcomes.