B2Bridge

It's a given that prices in competitive markets are not necessarily cost-reflective. But premium performance should justify a price premium.

Unfortunately, it rarely works this way for a variety of reasons:

• Premium performance becomes only evident well after the contract has been negotiated. Provided that the customer will even share this information with you, which they rarely will in full, you are at least bound for the contract term.
• In practice, suppliers and buyers know very well that premium performance is not always consistent over time. In a manufacturing process where supplier and customer engineers work for continuous improvement, it may change quarterly, or monthly.
• In the buyer's mindset, and in his organisational context, it is difficult to accept higher prices for the same product, even when there are good reasons.

What usually does work though is a strategy of positioning yourself as one of the quality suppliers. Many industries suffer from some form of counterfeiting from substandard competitors. Quality manufacturers as a group can position themselves and protect them against manufacturing operations working to lower safety, quality and environmental standards.

If they succeed, they will need to be price competitive among themselves, but not with the rogue suppliers.

Another strategy is to develop a product or service that is so indisputably different, for which you can be the only supplier for a while, and set your price within reason.