Get Out of the Commodity Business!

What you sell should be re-packaged and re-invented to differentiate it from competitive products and make apples-to-apples comparisons difficult or impossible.

The worst thing your business can do is be just like everyone else. And the worst reason your customer can have for buying your product is that it’s the cheapest. Live by cheapest price, die by cheapest price.

There are many, many product categories that are commodity items. My definition of a commodity is something that can basically be bought and sold by the pound from a half dozen or more companies.

The Pathetic Life of the Lowest Bidder

It’s easy to think customers only want the cheapest price, but that’s only true if nobody gives them a reason to pay extra and get more. Another Internet example: In the late 90’s, America On Line did a very admirable job of packaging their service such that it can’t be directly compared to other Internet Service Providers. Features like AOL Instant Messenger had proprietary features that other providers couldn’t duplicate. AOL always made it very easy to install their software and they’ve distributed their CD’s to just about every living creature in North America. This is how they maintained a price over $20 while many of their competitors went broke trying to do it for free.

Clever, Interesting Packages are not Commodities

Microsoft’s “Monopoly” battle with the Federal government was very complex, but the whole debate about packaging Internet Explorer with Windows proves the power of bundling things together. This is so powerful for Microsoft that it had Netscape and all the other enemies of Microsoft screaming bloody murder.

Many products and services are commodities, and if yours are too, then you need to take drastic measures to change that. You need to learn from Microsoft and AOL and add value, add services, bundle things together and make it so that a true apples to apples comparison with some other brand is difficult or impossible.

For present-day examples, look no further than Google and Facebook: They’ve taken these same ideas further than AOL or Microsoft did, creating entire worlds and hosting communities in ways that are very, very difficult for others to replicate.

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3 Comments on “Marketing 18”

  1. The answer is in Perry’s book in the example of the Valve company selling to the Pharmaceutical industry; by adding value, which in this case was a no-questions asked guarantee.
    I had the same experience a number of years ago selling screen printed shirts, which had been turned into a commodity. We dealt with it by offering a no-questions guarantee as well, which was if something is wrong with your print job (name spelled wrong, shirt color is wrong, sizes are wrong, OR if we miss the date of your event) we replace the job of refund your money in full. Did we ever have to pay money out because of it? Yes, but only a few times, which had another benefit to it. It made our production department a heck of a lot better because we now made people accountable for their decisions along the production process. and by the way, not in a, “Our Way or the Highway” fashion. We simply went to production and said, look, based on last year’s sales, here’s your bonus pool, it’s your’s to keep or lose because mistakes due to not double checking spellings, colors, sizes, etc, will be refunded to the customers out of your bonus pool. Some people might take offense to that, but as a bonus, it made the employees in the production department feel more appreciated, knowing that their jobs were important and that their contributions were appreciated.

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