Why the Factory is Moving South

Running a business isn’t easy.

I just watched a video in which the leader of well-known and well-respected brand informed his workers that their jobs would be eliminated in the next two years while the facility relocates to Mexico.

The leader of this company stated that the reason for the move was the price conscious nature of the customer who buys their product. He then said that moving to Mexico would allow them to keep up the product quality and productivity while lowering their cost and allowing them to compete on price.

Price Is a Strategy for One

This story is an example of why it is important that you create greater value as a sales organization and as an individual salesperson. It is imperative that you justify the difference in price when your price is higher than your competitor’s by creating greater value, value worth paying more to obtain.

Only one company can have the “lowest price.” If two companies both have the same price, one of them has to do something to differentiate their offering. It’s tough to win a race to the bottom; at some point, your money and energy produce greater returns elsewhere.

Good People Who Sell Badly

I’m certain the plant workers are good people who have done nothing to deserve to lose their jobs, even if their union wages and benefits far exceed the wage and cost structure in Mexico. American workers are very productive. I’m also certain the leadership team is made up of good people who are trying very hard to run a good business.

But I don’t believe that the people responsible for the leadership and marketing of this brand focused on the work of a sales organization. I doubt that they would even describe themselves as a sales organization engaged in the manufacturing of their product. They’d describe themselves as a manufacturer. And this is the root of their problem.

You are a sales organization that happens to provide the product, service, or solution you produce.

  • If a leadership team doesn’t focus on creating greater value and telling the story of how it makes a difference for their customer, then price quickly becomes the determining factor customers consider.
  • If a sales organization isn’t focused on sales and selling value, especially when their sales model is a difficult one in which to execute a value-creating approach, then the sales force defaults to price. You have to train, develop, and coach a sales force to succeed in selling value, including one not under your direct control.
  • If your marketing message doesn’t justify the price differential, create brand awareness, and equip the people who sell your product to capture effectively the additional value you create, then price will prevail.

It Matters

How you sell matters very much. It’s critical that you know how you create value and how you differentiate your offering.

There are great profitable businesses that don’t measure themselves on revenue alone. It’s okay to build a highly profitable business that owns the segment of the market that perceives value from what they do and who is willing to pay for it.

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Filed under: Competition

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