Can US Precision Machine Manufacturing Survive? – Part 6

business developmentThe Competition  –  With respect to the previous, it is clear that the competition for business in PMPI markets has become fierce, with price removed as a strategic differentiation. Companies that have survived and are emerging from “The Great Recession” should not be thinking in terms of ‘business as usual’ they should be thinking like startup companies. They in essence have to retread their company and start it on a new business and performance trajectory.

We have just made a pretty strong case that the PMP Industry is probably maturing; and that most of its products and services are commoditizing. It is nigh-on impossible to start a business by offering new products that are excellent commodities. How many toothpaste startups have you heard about recently? If you are competing on price, you are reinforcing the process of commoditizing your product or service, whether you know it or not.

Since PMPI companies cannot (or should not) compete on price they must therefore compete on something else, and that something else is not ‘selling more than the competition’. Selling more is not a solution to the problem, i.e. the solution is not related to volume. The solution is to deliver more value to your customer than your competition.

Compete on Value not Price
Value means that you deliver an economic benefit; i.e. your customer can make (or save) more money. It could also mean that the value you transfer makes your customer feel better and more comfortable (a psychographic benefit). You may also deliver value by solving a unique problem for a customer, or even better, solve a problem for his customer. Or all of the above.

Delivering value probably means that a PMPI Company must innovate in some way. Making the Company’s operations more efficient (Leaning it out), is not a differential advantage over the competition. It is innovative, but not the kind of innovation that provides advantages for PMPI companies; or puts the company onto a new business and performance trajectory.

Let’s consider ‘Innovation” as a separate topic later in this text; instead let’s continue to examine value and how it is achieved and applied. In the 1st paragraph of the “Website” portion of this paper we introduced a new concept ‘The Unique Value Proposition’.

One definition of a value proposition is “A unique value proposition is a clear statement of the tangible outcomes a customer will experience by using your products or services. It is results focused and stresses (quantitatively) the unique benefits you offer, and why only you can deliver them.”

Your Value Proposition should be one of the first things a reader sees when visiting your website homepage. It should highlight why your company’s offering is uniquely better than what is offered by other companies in the business. Here is an example of what is typical on most PMPI websites “Since 1946, XYZ Machined Products and Manufacturing has been providing customers with high quality machined parts and superior customer service.”

BIG DEAL! So does just about every other company in the PMPI business. There is nothing unique, or quantified-benefit oriented, in this statement. In a nutshell, a Unique Value Proposition is a clear statement that:

•   Explains how your product solves customers’ problems and/or improves their situation
•   Delivers specific benefits (quantified values),
•   Tells the ideal customer why they should buy from you and not from your competitor
(Unique differentiation).

Your Unique Value Proposition (UVP) should be short; easily understood; and easily remembered, so that it can be repeated by anyone you tell it to. You would like that your message (UVP) be passed around by word-of-mouth inside the market. Here is a good example of a UVP:

XYZ Company Guarantees that it will Repair Blown Head Gaskets in Just One Hour

It is clear (from this simple statement) what the company does, what the benefits are; the benefit is clearly quantified. This statement is even better than a UVP because it ‘guarantees’ results. This in fact is a Unique Value Guarantee, which is pretty powerful.

This type of statement should be the Objective for most PMPI companies; especially for those who are struggling to regain the market and profit position they held prior to The Great Recession, and Off-Shoring. Just having a PMPI company’s management team go through the exercise of creating such a statement, would be a great learning experience for them.