With an average of 360 days sunshine per year, this region is well used to the predictability that comes with that. Not having to consider the weather when planning family BBQs and other outdoor events – is highly appreciated by those from more varied climates. However, we also know that in this region, we get an average of five days rain per year. And when it comes, it can rain very heavily indeed.
With the build-up of dust and sand on the roads throughout the dry year, some drainage gullies can clog up. As a result, when the rain does come – flooding can occur. And given that drivers are not used to such heavy downpours, aqua-planing and other safety issues are a risk. There is also the added hazard of disruption on the road network. Therefore, drainage systems that transport rainwater efficiently are essential.
Birco is a German manufacturer of drainage systems with a base here in JAFZA, servicing the Gulf Region since 2013. Founded in Germany in 1927, the family business is led by third-generation Frank Wagner. In 1960, it pioneered drainage systems for the heavy goods agriculture sector. For example, it first developed a concrete channel and galvanised mesh grating combination, to cope with heavy duty vehicles.
Now a leading ‘full solutions’ manufacturer for storm-water in this region and in Europe, it has built a reputation for German quality linear drainage systems tailored for any environment. That reputation comes from a combination of deep knowledge and technical expertise, and high-quality products and solutions. Recent projects have included Le Louvre in Abu Dhabi, Dubai Bluewater and the new tunnels for Sharjah Road and Transport Authority.
The Business Model
Although not noticed by the general public, drainage systems are a key part of any structural and infrastructure project. When projects are at design stage, architects will always prioritise drainage requirements and then specify their preferred solution. These details are clearly laid out and attached to the plans – and then handed over to the building contractor.
This means that the local Birco office run by General Manager Johann Groult and Sales Manager Joe Barron, have two different sets of customers. Firstly, they must convince the architect to include Birco systems in their drawings and specifications. By building strong relationships, the team gains credibility to enable that. Architects take advice and draw from the expertise of specialists in various disciplines. And that includes drainage. Because of its 60 years of global experience, Birco excels in this.
But it doesn’t stop there. Once a contractor is engaged in a project, Birco then meets with the contract manager to introduce and re-iterate the rationale for the architect’s preference for a Birco solution. In some cases however, the contractors might favour a different brand. Perhaps they have established relationships with a competitor, or they can strike a deal for what appears on the face of it to be a lower priced alternative.
For Johann and Joe, they must outline to the contractor the long-term benefits and cost-saving of sticking with the quality Birco solution. Safe collection and transportation of storm-water protects the investor’s buildings and infrastructure users. The water cycle can then be made sustainable by storing and re-using the storm water.
The Business Challenge
If like Birco your products are also premium quality, then you most likely have a pricing strategy to support that. Selling premium products against low-priced competitors is a challenge for almost any industry. There will always be a competitor in your market who is in desperate need of a sale, that will sell their products at a lower price than yours.
The other issue is that this region has an unhealthy focus on price as if that was the only criteria. You’ll have heard the expression ‘buy cheap, buy twice’. In other words, higher priced products usually are of a superior quality than their lower-priced competitors – and they last longer.
But how can you compete with such lower priced alternatives? How can you achieve a fair price with a fair margin in a market when price alone seems to be the main driver of a purchase decision?
How to compete effectively with premium products
- Be clear on your market positioning. After studying your marketplace, decide on a pricing strategy that will enable you to differentiate and make a profit.
- Know your price architecture. Learn from great retailers that have a ‘good, better, best’ approach to product segmentation. That simply means that in most categories, they will have products at entry price level, mid-level and higher price. For example, Carrefour has ‘good’ fry-pans (at entry price). They have a ‘better’ collection at mid-price and a ‘best’ premium selection. This wider collection enables them to cast to a wider net of customers. If you too can do this, it gives your sales team a structured approach for upselling and handling price objections.
- Know the USP (unique selling proposition) of all of your products. If your products are premium, be clear on what makes those products premium. If a customer can’t see the added value of your product, they will assume that you’re expensive. And that just adds to the risk of losing the sale and reputational damage for your business.
- Communicate your pricing strategy to your sales people. Don’t make assumptions that they know it. Ensure your team understand the context and market positioning of your product edit and your pricing policy. Explain the profile of your target customer to them. Dispel any risk that they might have their own in-built unconscious bias to price.
- Then train them on how to sell your products. Show them how to confidently present your products with conviction, regardless of your pricing policy.
(In a future article, I will return to this topic and discuss specific tips on how to overcome price objections in particular).
The Last Word
Unless you have incredible scale or a significantly lower cost model than your competitor, trying to be the cheapest in your market is a highly questionable strategy. There is usually a competitor that is in greater need of a sale than you. And they’re often willing to pay for that with lower prices. For many of us, it’s just not sustainable with costs rising continuously. A realistic and fair margin of profit is essential after all.
There is nothing wrong with premium pricing so long as your proposition matches or exceeds what your customer deems to be value for money. By the way, it’s important to not confuse this point with unscrupulous companies that try to charge high prices for poor quality. But in my experience, it’s not a sustainable business model and they get found out eventually. After all, the general market is a good long-term arbitrator of the quality/value/price question.
One way or another, study the market and make an informed decision about your positioning. Then communicate that to your team so that they can sell with confidence.
Alan O’Neill – the Change Agent, is a speaker, consultant and trainer. Go to www.alanoneill.biz if you’d like help with your business.
© Copyright. Alan O’Neill. All rights reserved. 2019