Charlie Puissegur, of CHPuissegur & Associates, reminds us that product life cycles and other related forces create their own form of pressure. He says:
I believe a general condition of over capacity for many products and services exists today, and to the extent one's products and services are in the group of those which have an unfavorable supply/demand ratio (which itself has a range of severity) the pressure will be greater.
What has not changed is the normal product life cycle and its associated margin phenomena. New products that are eagerly sought after by the market place tend to have better margins than those approaching the end of their life. It is the nature of the thing that mature products tend to become commodities, and margins shrink.
It is also true that organizations that find methods to solve real business problems for their customers using their respective products and services may enjoy much greater margins if the problem they solve has an identifiable and measurable value that is perceived by the customer.Charlie shared these thoughts on the effects of supply and demand and product life cycles in response to Price Pressure | Fact or Fiction? He's a B2B Write Now guest contributor.
In any case I believe the margin discussion has more to do with some combination of these things than an across the board percentage pressure due to today’s economy.
EXAMPLE
If you have a product at the end of its life cycle with little particular perceived value, you will most likely be under price pressure 100% of the time.
If on the other hand, you have a new product that solves a very real business problem with a clearly defined and agreed upon value, your price pressure will most likely be much less.
A similar argument, with some obvious changes, could be constructed to consumer products.
Stay tuned. Next week, we'll recap the highlights of the price pressure survey, and soon, we'll release the price pressure white paper developed in collaboration with Bob Chapman, Sandler sales coach.
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