How is it that the country with the largest oil reserves in the world is nearing economic collapse? The same reason B2B brands in a crowded space find it nearly impossible to survive: inflation.
Inflation is an invisible force, but it can decimate both economies and B2B brands alike. In this article, I’ll explain how an “inflationary” environment can threaten B2B companies. And I’ll lay out two strategies that will help your company survive.
When Inflation Gets Out of Control, It’s Decimating
Just six years ago, the economy looked relatively stable for Venezuela, with its ever-increasing oil reserves. Its currency, the Bolivar, held steady.
But when oil prices weakened, Venezuela had a hard time using oil production to pay off its debts. So it resorted to printing more currency instead. This created just one problem: for every newly minted Bolivar, the currency was worth just a little less.
That would be OK in limited doses, but the government has printed so many Bolivars that the currency is now nearly worthless. Economists at the International Monetary Fund expect its inflation rate to reach 1,000,000% this year, and as you might expect, the Venezuelan economy is in ruins.
Getting out of this situation will be no easy task. And as we’ll see in a moment, B2B companies can fall into a similar trap, one that can be equally decimating.
How A B2B Brand Becomes Devalued From Inflation
Just like countries with runaway currencies, B2B brands may also find themselves in “inflationary” environments. Here’s how that happens:
- A “hot” new B2B space emerges, typically one with low barriers to entry
- The first company in the space has the market all to themselves.
- Soon, a couple of competitors emerge. The healthy competition helps drive market adoption, and the category is a good place to do business.
- After a while, though, latecomers join in. A space that was once occupied by a few businesses is now crowded with dozens of similar companies.
- As potential buyers evaluate their options, they start to perceive these businesses commodities
- As this trend continues, competitors have to increasingly compete on price, features, or advertising budgets
- The result is a highly fragmented market with much lower profit margins for competitors in the space
Inflation In A B2B Environment Is Bad For Sellers and Buyers
Everyone loses in this situation.
The downsides for the sellers are pretty obvious. It’s a “red ocean” scenario in which each new entrant causes existing competitors to spend even more resources on winning that next dollar of revenue. Some businesses may even find it impossible to generate profits if their marketing costs are too high.
But buyers miss out too. Yes, they may be paying less, but because the companies they do businesses with have less revenue to pay for R&D and support, they might not find a great solution from anyone in the space. Not only that but trying to find the ideal solution when there are dozens of similar companies can require a bit time investment.
How B2B Brands Can Exit Situations That Cause Brand Inflation
Fortunately, there are ways of avoiding this trap. And two of the most effective methods involve your company’s brand. There are two solutions that I’ll outline here: one is called the “polish” approach, and the other “reframing”.
Solution #1: Create An Amazing First Impression By Polishing Your Visual Identity
You may have the lowest price or the best features, but unless your brand creates a strong first impression that convinces buyers to give you a closer look, you’re not going to get very far.
This is where polishing your visual identity comes into play. By turning your “decent” logo, website, and marketing collateral into something truly outstanding, you can create the perception that you’re the leader in the space. Or at least that you’re worth talking to. If your brand were a currency, this would be akin to exchanging your $5 bill for a $500 one.
This approach is not without its challenges, though. First of all, it’s hard to measure. You’ll have to be OK with knowing that any improvement in visual identity may be subjective.
Secondly, it’s not cheap. Depending on how extensive your website is and how much marketing collateral you’ll need to update, the exercise could easily cost $100,000 (or even many multiples of that).
Finally, visual identity alone may not be a lasting advantage; your competitors can just as easily hire a top design agency and erode much of what you’ve gained.
I’m not saying these drawbacks mean you shouldn’t invest in a better visual identity; it might be perfectly necessary to keep you from getting overlooked. Just know that another measure might be needed, too.
Solution #2: Carve Out Your Own Market By Reframing The Your Position
The other option for avoiding inflation in a B2B environment is positioning your company differently from your competitors. You’ll describe your company in such a way that you place your brand in an entirely separately category. If your brand were a currency, this would be like exchanging your Bolivars for US dollars.
Let’s look at video conferencing as an example. Instead of trying to compete in the general market, companies competing in this space might be better off by being more creative in the way they describe themselves.
For example, one company might tout its focus on security and recording functionality, positioning itself as “the ideal solution for documenting legal, HR, finance conversations.”
Another might focus on the target market of businesses whose employees have to make video calls without Wi-Fi, and they could position themselves as “the leader for cellular-based video chat.”
I could go on, but I think you get the idea. Instead of companies trying to come up with the “best” or the “cheapest” video conferencing software in the board sense, they could stand out much more easily by reframing the way they are positioned.
The beauty about reframing your position is that this maneuver is more difficult for competitors to emulate. Why would they? If you’ve already claimed ownership of a particular niche, then they’d be better off trying to address a different part of the market instead.
Here’s the hard part about this marketing strategy, though: it takes real discipline. It’s easier said than done, especially since a clear position might mean “no” to certain opportunities. But if done right, reframing your position can build a defensible market for your business.
The Good News: You Don’t Have To Pick
Currencies and B2B brands are subject to the same reality: as the number of substitutes grows, the value of each individual entity decreases.
Fortunately, B2B companies have multiple options for avoiding a market with lots of “inflation”. Even with branding, there are two strong options: a strong visual identity that creates a meaningful first impression, and a redefined market position that helps you own a particular market niche.
The good news is that you don’t have to choose just one approach or the other. By creating (and ultimately owning) a new category, and by cementing that new position with an amazing visual identity, you’ll create a strong defense against any potential competitors.
An abbreviated version of this article also appeared in Inc.