When there are too many companies competing in strongly contested markets suppliers struggle to obtain the favours of customers. There is pressure put on profits because of the over-capacity and this can result in companies setting a price policy that, to an outside observer, often appears suicidal. In difficult markets like these what advice can be given to smaller suppliers trying to compete? Five important survival strategies used by smaller suppliers to help them survive in strongly contested markets are described in this sales training article .

Concentrate on high turnover and/or your service-oriented medium-sized clients.
Buyers in large companies are usually served by large branch suppliers. In difficult economic times it is very difficult to get near these large-scale customers.

Larger companies urgently need this customer group to make full use of their capacity. They will, therefore, fight hard for them.

Compared with their larger counterparts, small and medium-sized customers do not have the same purchasing power and cannot therefore put so much pressure on price. Consequently: you will sell smaller quantities to them, but these will be at better profit margins.

To give an example, small to medium-sized haulage contractors are concentrated specifically on a medium-sized American lorry manufacturer. This is because this customer group demands a good service at an affordable, not cheap, price.

Surpass the user service offered by your large competitors with the help of trading partners.
Small and medium-sized suppliers often provide their products to the end user through trading partners. This strategy can be the key to providing an improved user service. In partnership with the trading partner the smaller supplier can create a better service for the users of their products.

For example, a photocopying machine manufacturer makes sure that either one of their trading partner’s employees or one of their own client care technicians repairs any faults within three hours.

Trading partners may be incentivised, with some smaller companies offering their trading partners the possibility of earning more money with their product than with any of their competitors’ offers.

An alternative approach is to provide support to the trading partners by offering sales training in the areas of product knowledge and service. This approach encourages the trading partner to always recommend the company’s product to interested customers before they recommend any others.

Only make considerable price concessions when dealing with your larger customers.
To a certain extent current and potential large-scale customers are in a position to dictate price to small and medium-sized suppliers. Generally this will not create a problem, as long as the same price concessions are not offered to other buyer groups.

When selling cheaply to their large-scale clients smaller companies often try to modify the products that they provide. For example by changing the specification, design or the packaging, by selecting other brand names, by simplifying production, or slimming down the guarantee package. They also  make sure that these cheaper products take up no more than 20-30% of their total manufacturing capacity.

React quickly to falling market prices.
At the start of tough price clashes on the market the majority of suppliers live under a price umbrella. This price umbrella is created because over the past few good years the larger suppliers have reached a very comfortable price level that no one undercuts.

However, with a falling use of capacity the price umbrella starts to leak. This is caused because some companies start to ‘buy’ themselves a better use of capacity by granting price concessions.

When this leak starts it is the best time for small and medium-sized suppliers. The smaller suppliers can act below the price level by instituting reductions and thereby gain a greater share of the market whilst the larger suppliers are still swaying because of their inertia and still secure financial situation.

Check the profitability of all your clients.
Most small and medium-sized suppliers, as a result of their targeted activities, usually get higher prices than their larger competitors. Whilst this is a good thing, we should not forget that most small and medium-sized suppliers also incur higher costs. Every better service you offer, every faster delivery you make and every longer guarantee provided costs money.

This is why it is so important that the sales force of small to medium sized companies analyse their clients’ profitability, or at least the profitability of their larger clients. This analysis sometimes forms part of sales training courses. When it is done the results often show that because of the low prices paid some clients get more from you than your company gets back from the client! This is something smaller companies, in contrast to larger suppliers, simply cannot afford to do as they can not carry non-profitable customers for very long.

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