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Get better and become unique, improve and distinguish yourself

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The question is neither new nor unique. We ask ourselves every day ‘How can I lower the cost of my product to gain more customers?’
We accept the fact that we live in a price-driven world that values quantity over quality, and our industry seems to embrace it. We maintain that our customers make their purchase decision largely based on price; therefore our focus is on cutting costs. By using low-cost materials, hiring inexpensive and low-skilled labour and manufacturing on old (but paid off) equipment, we offer average products that we believe our customers want.
Let’s look at it from the consumers’ perspective. Our customers see many comparable products and differences in quality or functionality are hard to identify. It is common sense, everything else being equal, to decide on the product with the lowest price tag. This again affirms our assumption that our customers base their buying decisions mainly on price, which creates a vicious circle. This downward spiral keeps going around and around and prices (and quality) are spiraling down and down. In the end, all that is left to consider is the price and it doesn’t matter for how little you offer your product, there is always someone else who will offer the same or similar item for slightly less.
The Canadian woodworking industry finds itself in a difficult position; we are trapped between cheap imports from Asia and unique high-end designs being sold directly from Europe. We can neither match the prices at the bottom nor can we easily compete with quality and design at the top. The steady growth of furniture imports from 1997 ($1.4 billion) to 2011 ($5.1billion) shows a trend that we urgently need to reverse.
So how can we escape this Catch-22?
My answer is the continual improvement of the products and production process, as well the development of unique selling features. 

GET BETTER AND IMPROVE
Change your focus from price to product and production process. ‘How can I improve the quality and value of my product?’ That is the question every- body in your company needs to constantly ask themselves. Optimize your production process - become leaner, improve your yield, consume less energy, shorten the lead-time or optimize the processing time on one specific machine. These are just a few possible areas to start with. Sharpening your tools in shorter intervals to avoid chipping of your panels will increase your tooling costs, but those will be offset by less rework or customer returns. Other improvements like the use of better adhesive (with less filler) will improve the quality of your product (less visible glue line) and save you costs by reducing cleanup of parts. The use of better chipboard improves the appearance of your product (e.g. less chipping when drilling shelf holes) and reduces the need for manual repair.
To improve quality does not always lead to higher costs, in some cases it may even save you money. However, the quality of your product will increase and consumers will recognize it. They do not have to decide solely on price, because you can demonstrate your differences to them. Consumers will respect a quality product, which may allow you to charge a small premium. This premium can be re-invested in your product design and production system, and another circle starts, but this time in the right direction – upwards. 

BECOME UNIQUE, DISTINGUISH YOURSELF
Offer something different! Stand out and make your product unique and distinctive. Who has not heard this phrase: ‘Your competitor offers the same product for X% less’
Wouldn’t it be great to be able to answer: ‘Sorry, but nobody offers a product like mine, my product is unique and you can’t get a similar product from another supplier.’
What you are really saying is: ‘If you want these features, you have to accept my price.’
I have sold equipment in other industries, in many countries and I have often been asked: ‘You see a lot in our industry, what are others doing?’ If a company is already doing something that is similar to what my customer was planning, he will lose interest very quickly. His reasoning is that there is no benefit to offer the same product – the only differentiation will be the price. In North America the question is the same, but the reaction is the complete opposite. ‘If my neighbor can sell these products, there must be a market. I want to capture that market, consequently, I need to produce the exact same product, but at lower cost.’
The danger of this strategy has been explained above. For example, I personally like 2mm edge tape. It gives a cabinet a modern, stylish appearance. When it comes to ‘thick’ edge, as opposed to the commonly used ‘thin tape,’ 3mm PVC edge material is used in most cases. Why not use 2mm edge tape? Certainly one can argue about taste and style and if you offer something different there will always be people who don’t like what you do, but the ones who do like your product will buy it. It is better to have a large slice of a niche market rather than trying to protect a smaller slice against countless competitors.
I know companies that do exactly what I described above and most of them are real success stories. They are growing substantially year-by-year, even during the recent recession and they enjoy lucrative margins. Why? Because they offer something special that makes them unique and allows them to stay away from price wars.
This unique selling point can be part of your product design, but it can also be rooted in your customer service or other intangible advantages of your company.

Christian Vollmers is the president of HOMAG Canada Inc.
He can be reached at Christian.Vollmers@ homag-canada.ca or visit the website at www.homag-canada.ca

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