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One of the universal facts of life in business is the on-going struggle between supplier and customer over who gets to keep the lion’s share of the value created by the product or service. The customer continually tries to shift the basis of negotiation to price, while the supplier seeks to maintain a premium based on differentiation. Recently, the balance of power has shifted resolutely in the customer’s direction. Suppliers face relentless competition in today’s global marketplace, and with the consolidation of retail and other distribution channels, the customer is as powerful in the B2C world as it is in B2B.
In this environment, rapid commoditization is the fate of any company that doesn’t continually bring new and differentiated value to the negotiating table -- or isn’t adept at leveraging that differentiation when it gets there. Unfortunately, many companies have difficulty sustaining real differentiation, and even when they do have premium brands and offerings, they tend to make decisions for short-term gain that undermine their leverage and accelerate their own commoditization. To avoid these traps, companies must aggressively raise the bar. They have to adopt a more strategic approach to product development and portfolio management based on real insight into emerging customer and end-user needs. They also need to take a more sophisticated approach to "doing the dance" in managing relationships with their key customers to ensure that the customers recognize and reward their unique value.
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