Many businesses are dealing with stagnating sales right now. In a time where cost-cutting is rampant, your customers may also be asking for discounts and in some cases pausing or ending partnerships altogether. If this sounds familiar, you’re not alone.
There are many strategies companies use to shelter from these headwinds (e.g., loyalty or retention programs, revising contract terms and conditions around termination, or increasing contact cadence to reiterate value messages), but there’s one strategy that can help you play defense and offense at the same time.
Enter the “flanking product,” which is effectively a lower-tier product or service that strips away much of the costlier and higher-value components of your flagship or original offering. There are three key situations where developing a flanking product pays off in spades.
Situation 1: Where’s the growth?
At some point, it’s necessary to look beyond your early adopters who willingly paid high introductory prices. The flanking product is just the tool to unlock this opportunity. First, you continue serving the top tier market segments with your existing product. Then, you can leverage the lower-cost flanking product to target larger segments of price sensitive customers.
Additionally, for customers with budget constraints, they have an option to stay with you as a partner while keeping the relationship “fair” to both sides – the value you’re delivering is balanced against what they’re paying, which avoids unnecessary discounts that are often the knee-jerk reaction to customers who come to you with a problem. When their budgets are restored, you’re still there to resume the higher value and higher cost offering.
Situation 2: Get off my lawn
If your product is well-established, you may have experienced “ankle-biter” competitors approaching your customers. Think about something like consumable medical supplies – once created, other companies will likely have their own take at making it faster and cheaper to steal market share from you. Flanking products address the ankle biter competitors by offering a lower cost option while upholding your company’s unique value, at a lower tier.
The reason this strategy is often effective is that it makes procurement easier for your customers, increasing the likelihood that customers keep a larger share of their wallet with you rather than seeking out secondary suppliers.
Situation 3: No, you can’t have cake and eat it, too.
Flanking products also unlock another offering tier to deploy as a negotiation tool. Give-Gets provide your commercial teams with an easy to communicate structure to maintain price-value alignment. Instead of granting or negotiating over discount requests, you enable sellers to take ownership of the conversation by responding with “Sure thing, we can absolutely support that budget – here is our product for that range.” This either calls your customer’s bluff and they’ll respond with “well we actually need the higher-tier product” if they’re just playing poker, or will be more likely to make a purchase if they’re a price buyer looking for bare bones specs.
In most business situations, there are inherent tradeoffs to pursuing different strategies. Case in point – should companies cater to fewer customers with a high-priced product, or cater to more customers with a moderately-priced version? However, it’s never too early to think about introducing a flanking product, because the time it takes to develop the right offering typically means that certain market segments will be ready for it by the time it launches.
