Back to Basics: Lessons Learned from Q1
After a rocky start the first week of the year, Q1 continued with falling oil prices, volatile stock markets, and the economic slowdown in China. Despite these trends, by the end of Q1, with inflation in check and lower unemployment, the U.S. economy appeared to be back on track for two percent GDP growth this year. In response to the volatility and uncertainty experienced in Q1, Blue Canyon observed that many business-to-business (B2B) executives took proactive steps to confirm their corporate strategies, competencies, and plans were bullet proof. In fact, many returned, or are now returning, back to basics to address latent weaknesses and strengthen core capabilities.
As of late, this back to basics approach has been on two fronts: pricing and channel.
While pricing strategy has always been an important lever to business success, many firms have continued to invite us to help them re-evaluate their pricing strategy with a specific focus towards value-based pricing. It’s no surprise. With the U.S. market performing relatively well compared to other major markets, global competition and pricing intensity has increased significantly this year. For example:
- In the global heavy equipment markets, manufacturers need to fill plant capacity and are now focusing on the U.S. market to take advantage of relatively strong demand. This shift has caused current players in the U.S. to face increased price pressure, and as a result, re-evaluate their pricing strategies
- Specialty chemical manufacturers, who previously served the oil and gas industry, have compensated for the lack of growth globally by moving into adjacent U.S. markets, only to find competitive prices forcing them to enter at a low price point
In each scenario, Blue Canyon has helped clients identify a pathway to remain relevant without giving up price.
Redefining and Optimizing Channel Strategy
Across a range of industries, leaders are identifying emerging capability gaps with their channel partners. Technology enhancements have affected (or circumvented) distributors, wholesalers, and dealers, opening a pathway for alternative channel partners.
- In one case, a security solution supplier identified gaps in its distributors’ use of new productivity software, causing the manufacturer to re-evaluate its channel partners and how to support them
- A major player in the power solutions market decided it was time to reorganize its channel strategy to combat competitor moves and gain share while also exploring new technology to improve connectivity (such as order trackers and ‘find me an expert’ inquiry platforms)
What Should Executives Be Asking?
Returning back to basics in 2016 will provide B2B companies with a solid foundation and preparation for future market volatility. By strengthening pricing and channel strategies, companies are taking measures to protect themselves against new entrants, channel disruption, and price degradation.
Moving forward, B2B executives should be asking themselves:
- Are we making strategic decisions that protect and support our core business against future turbulence?
- Where are we seeing pricing pressure and what can we do to better defend the value of our solutions?
What risks do these economic trends pose to our primary channel network, and what can we do to strengthen our connections with our top channel partners?
View Blue Canyon’s Latest Insights on Pricing and Channel:
|New Entrants||Promote your services, nurture customer relationships, retain or expand any product differentiation, and be attentive|
|Alternate Channels||Promote your points of differentiation, particularly those that are expensive or time-consuming to duplicate|
|Consolidation||Promote your services, nurture your customer relationships, and be attentive; Look for buy or sell opportunities|
|Converging or Integrating Roles||Stay abreast of changes and keep your customers’ problems in your sights|
 Putnam, Laura J. (2016). Three Reoccurring Principles for Pricing Strategies. Retrieved from Blue Canyon Partners, Inc. Blog