Dear Sales Reps: Stop Commoditizing Your Product

Stop selling on price and start selling on value

I’ve been a Sales Representative in the Northern Illinois & Chicagoland since May of 2015 for Kacey Enterprises. Kacey is a sales rep firm that represents a handful of industrial manufacturers. I mainly sell electric motors, gearboxes and motor brakes. For this particular subject, I want to focus in on my experience of selling electric motors, specifically Marathon Electric Motors based in Wausau, WI. Throughout the past 18 months, I have interacted with engineers, purchasing agents, CEO’s, maintenance managers and many other types of industrial professionals. In that time, I have heard a common statement: “Electric motors are commodities now, so it really comes down to price for me.” It is true that electric motor manufacturers have many interchangeable dimensions that allow for easy drop in replacement. However, the idea of putting electric motors into the same category as wheat or barley, is completely ridiculous to me. According to a report by the IEA in 2011(see link at bottom), electric motors consume roughly 45% of the worlds electricity. Say you own a factory that spends $100,000 on electricity annually, let’s assume half of those costs are consumed by electric motors. Even a few percent improvement in efficiency can save your company thousands of dollars. Although industry standards such as NEMA and IEC exist and require companies to comply to efficiency standards, this does not mean all electric motors are created equally. This is especially true in today’s market, as more and more electric motors are being operated using variable frequency drives which are devices that can change the speed of the motor. Efficiency standards only look at a motors efficiency when it is run at its base speed. A motors efficiency is different at different speeds. A motor may be 40% efficient when ran at half it’s base speed. That means 60% of the electricity that the motor is consuming is being wasted. There are many variables that go into a motors performance such as design quality, material quality and manufacturing quality. Electric motor manufacturers all have their own engineers, factories and raw material suppliers. Electric motors are not created equal and different brands have different characteristics. If we were to compare efficiency curves of several different branded electric motors, we’d see very distinct and unique efficiency curves(motor speed on x axis & efficiency on y axis). Whenever I have a customer try and tell me that a motor is a commodity, I challenge them. I often use evidence that I have presented in this article to disagree with them. In order for a good to be a commodity, it must not have any discernible differences. Electric motors are not commodities!!

Hopefully at this point, you are now convinced that electric motors are not a commodity. My expertise lies in electric motors, and it is my responsibility to educate my customer on why the product I’m selling is unique and has certain advantages over my competitors. However, I am sure that this theme of product commoditization is not unique to the electric motor industry. I don’t blame the customer for trying to make my product a commodity, it usually leads to cost savings for them. They can cause motor brands to undercut one another to get the best price. I’m a firm believer that certain products do not sell themselves, and successful sales reps are ones who provide their customer with great service and education. I believe it’s crucial to challenge your customer when they try to commoditize your product. Remember, as a companies margins thin out they will be forced to look for ways to cut costs and sales people are expensive. If you simply sell a product based on price, you are a commodity.

Sources: https://www.motorsystems.org/files/otherfiles/0000/0079/werle_emsa_12092011.pdf

https://www.merriam-webster.com/dictionary/commoditization