When the Customer Underestimates You

One of my favorite stories from the early days of building Flavor Infusion happened during our first two years in business. We had an opportunity to work with a very large global company on the launch of a completely new beverage line. This was not a minor project. If we won the business, it had the potential to double our company almost overnight.

The problem was that we were not really supposed to be there. We were not one of their “core flavor suppliers” and we were not firmly established on their “approved supplier list”.  Many lower-level employees at this company were constantly reminding us of this. Fortunately, a few people in senior management saw something in us and were willing to give us a shot.

The objective was to develop the best-tasting zero-calorie, fortified flavored water possible. We were responsible not only for the flavor, but for helping develop a beverage that met the functional requirements, fit within the customer's current manufacturing plants and could hit the required cost parameters. Because of the potential size of the opportunity, we made the decision to go all in. We devoted a huge amount of technical time to the project over the better part of a year and passed on smaller opportunities along the way.

The biggest challenge was not developing the beverage. It was getting a fair evaluation.

When we submitted our initial samples, the response was about what you would expect. The people who had supported bringing us into the project liked what we developed. The people who had questioned whether a company our size should even be participating found plenty of reasons not to like it.

Eventually, the company decided to take the internal opinions out of the equation and put the products in front of consumers. They spent more than $100,000 conducting preference testing, putting our beverages head-to-head against formulations from a couple of the largest flavor companies in the world.

This was our David versus Goliath moment, and the results were not close. Across eight SKUs, we won seven of them. On the products we won, consumer preference was at least 70%.

We kicked the crap out of them, and it felt good.

For a young company trying to prove that we could compete at that level, it was a huge moment. Suddenly the approved supplier list did not seem quite as important. Neither did the size of our competitors, their global footprints or their massive R&D budgets. The consumers had no idea who developed which product. They simply knew which beverage they preferred.

Ours.

Why We Won

Our competitors had technology we could not afford, global application centers and resources that dwarfed ours. But they try to be experts across almost every food and beverage category alongside fragrances. At that time of our business, we were focused exclusively on beverages, and that specialization became our advantage.

Before we ever received this opportunity, we had invested heavily in training our beverage technologists and flavorists at the bench. Once the project started, we went deep. For nearly four months, the team worked through every combination we could think of: flavor systems, sweeteners, acids, mouthfeel, stability, cost and manufacturing constraints. There were maybe thousands of internal tastings and iterations. Multiple presentations to the customer.

We also turned the development process into an internal competition among our beverage technologists and flavorists to see who could develop the strongest solutions. It created more ideas, more experimentation and better collaboration. It also added some fun during what was an otherwise chaotic and stressful process.

The larger companies had more resources. What we had was focus, specialization and an enormous amount of attention on one customer and one application. In this case, that mattered more.

Once we won the consumer testing, we still had to execute. We geared up quickly and helped the customer scale the formulations across seven manufacturing plants. The product line launched and became an immediate success.

That project shaped the way I thought about differentiation for the rest of my career.

Your Customer May Not Understand Your Value

Sometimes a customer needs what you do more than they realize. And probably more than you realize. They may initially see you as another supplier, another ingredient company, another manufacturer or simply another vendor they can put out to bid. The answer is not to complain that the customer does not appreciate you. The answer is to make your differentiation obvious and execute on it.

As Flavor Infusion grew, we became increasingly selective about how we worked with customers. We sometimes chose not to participate in opportunities where the entire process consisted of, "Send us your samples and we will compare them against everyone else's."

There is nothing inherently wrong with that approach, and sending samples can certainly open doors. But it was not where we created the most value. We were much stronger when we could understand the application, work through the problem with the customer, develop the solution and use our technical team as an extension of theirs.

We wanted to be a development partner, not another anonymous sample sitting on a laboratory bench. That positioning helped drive a very high project hit rate because we concentrated our resources where we could make the biggest difference. It also tended to lead us to larger volume potential.

There is also a practical reason for this. Our capacity was never unlimited. If you try to be remarkable to every customer, on every project and in every market, eventually you spread your resources too thin. Your service suffers, your message gets diluted and the customer has a harder time understanding what actually makes you different.

When differentiation disappears, price becomes the easiest point of comparison. At that point, you start getting negotiated like a commodity supplier whether you intended to or not.

A Specialty Ingredient Does Not Make You a Specialty Company

I see this often in the ingredient industry. A company sells flavors, functional ingredients, specialty sweeteners, stabilizers, emulsifiers, proteins or some other technically important product and assumes that alone makes it a specialty business.

It does not.

Specialty ingredients can represent a very small percentage of the total cost and volume of a finished product while having an enormous impact on taste, texture, stability, shelf life, manufacturing performance and ultimately consumer acceptance. That should create a tremendous opportunity for ingredient companies to become strategically important to their customers.

The value has to extend beyond what is inside your package.

Maybe it is application expertise. Maybe it is speed, technical knowledge, creativity, customer service, proprietary technology, market knowledge or the ability to solve problems that others cannot. Usually, the best companies combine several of these capabilities.

If the only thing separating you from five competitors is the product itself, you should not be surprised when procurement treats you like a commodity.

Know Why You Win

Companies spend a tremendous amount of time trying to understand what customers want. They should spend just as much time answering a different question: Why should this customer buy from us instead of somebody else?

"Our quality is better" is often not enough. Neither is "our service is better." Every company says those things.

You need to understand specifically where your company can outperform the market and then build around that advantage. At Flavor Infusion, we were never going to outspend the world's largest flavor companies, have more laboratories or operate in more countries, so there was no point pretending otherwise.

Instead, we focused on the area where we believed we could beat them and made sure the customer could see the difference in the finished product, our communication and our execution. That is where we invested our resources. That is what real differentiation looks like. It is the expertise the customer experiences, the results you deliver and the reason they hesitate before replacing you.

Sometimes the customer will recognize that immediately. Sometimes they will not. Either way, your job is to give them a reason they cannot ignore it.

If you're struggling to clearly define what makes your business different, build stronger relationships with the customers that matter most, or compete more effectively against your strongest competitors, Nubev Strategic can help.