Escape from the Commodity Trap

This could hurt

Selling what others widely perceive as a commodity can be tough enough, but imagine trying to do that when broader trends combine to drive down demand for your product. That’s the challenge that faced Mohawk Fine Paper, a company profiled in Saturday’s Wall Street Journal. Their response to the challenge provides some excellent general lessons for salespeople.

Mohawk used to have a profitable business selling paper to companies for their annual reports, but the business began to shrink in the late 90s when firms began putting their filings on line, and then really plummeted in 2007 when the NYSE no longer required companies to send paper copies to shareholders. The company gradually scaled back operations from seven days to four at its main plant.

Their response was to literally bet the company on a strategy aimed at moving up the price/value pyramid, as they began selling high quality stock to small batch digital printers such as Shutterfly. Their debt swelled from $8m to $103m as they made the necessary investments to make the shift—before being certain their strategy would work.

The bottom line is that they did succeed, and today 40% of their business comes from this profitable sector. Mohawk is just one example of others in the US paper industry in general, which has seen its share prices outpace the S&P 500 by five times since 2009.

What lessons can sales professionals take from the story?

If it’s going to happen, it’s up to you. Someone unfamiliar with the details of the story could easily conclude that Mohawk got lucky—they merely stepped off one sinking ship onto another that was passing in the form of new demand. But that’s not how it happened at all. The demand was not there until Mohawk approached Shutterfly with samples of photo cards printed on special paper and got them excited about the quality.

But it takes knowledge about your customer. Approaching their customer is a new idea was an excellent example of seller-led insight and consultative selling, but even more instructive is how Mohawk was able to get to that point. They thought it was a good idea, but in order to test it they actually bought a small online company for $2 million just to better understand and test their own insights about their customers’ industry. So, by the time they brought the idea to their customer, they had huge credibility. Today they have a research lab dedicated to learning more about their customers’ needs: “the company hopes to show designers, ad executives and printing companies new ways to pair digital printing with high-end paper.”

It’s risky. Not everything Mohawk tried worked out; they tried to appeal to environmentalists by selling chlorine-free paper, but no one bought it. And they had to take on massive debt to make the investments to play in a new space. Any time you read an article like this, it’s important to keep in mind that if the company had failed, we would probably not be reading about them today. But sometimes the biggest risk is not doing anything.

Obviously, one company and even an entire industry don’t prove anything, but if you are facing your own commodity trap, I leave you with this one question: what risks have you taken to learn something new and valuable that you can teach your customers?