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Tag Archives: Commoditization

Is Product Commoditization An Issue For You?

First published on January 6, 2016 on www.marketingprofs.com – a preminent resource on best practice marketing techniques for the benefit of the members. What is MarketingProfs? Individual marketers, teams, and entire marketing organizations at the world’s largest corporations rely on us to cut through the chaos to find the marketing experts you can trust and the information you need. Trusted by 600,000+ professionals globally, MarketingProfs is the only resource you need to stay ahead of the curve. Read more:

Is Product Commoditization An Issue For You? And What Can You Do About It

January 6, 2016

Commodity Graphic - 123rf
Your company sells unique and differentiated products – or at least that’s what you think. However, your competitors have been trying to match you or maybe offering similar products at a lower price. You also think your consumers/customers are loyal and won’t switch if given an opportunity. Yet, they are much smarter – and are rationalizing purchases more – than ever before.

Marketplace competitors – either direct or substitutes – can easily make your products or services a commodity where everything comes down to price.

How do you know if you’re being commoditized? And how can you avoid that undesirable fate?

Let’s examine what defines various states of product commoditization.

a) Your product is offered by many:
Examples include things like some food and non-food items, restaurants, law, financial services, even personal services like fitness and hair cutting, etc. Meaningful differentiation is essential to deflect lower prices. What do you do?

  • Be the #1 or #2 share leader. Being so gives you critical mass since it implies customer satisfaction and allows you to build entry barriers due to your size.
  • Have third parties talk good things about you – either in social media, product ratings or customer awards. However, don’t just rely on Facebook pages. Not everyone looks at Facebook all the time.
  • Don’t focus just on price. Remind customers/consumers of your products relevant features/benefits.
  • Be the marketplace expert and offer free advice/counsel. Doing so might not result in an instant sale, but people remember who’ve helped them in the past.
  • Be easy to do business with. Customer service/convenience can make or break a sale. Time, too, has value to your users.

b) Your product is offered by some:
You have a somewhat unique product. Also, your product category has substantial barriers to entry limiting competitive entrants. Examples may include utilities, cars, travel, telecommunications, capital equipment, etc. What now?

  • Offer aftermarket service. Buying a car, computer, or telecom services is more than a one-time transaction relationship, offering you a continuing opportunity to build future purchases or upgrades.
  • Off a full-line product/service. Depth can offer consumers/customers a “one-stop” shopping experience, “locking-out” competition. Wal-Mart is ALWAYS looking for “one-stop” suppliers/vendors.
  • Product availability is important. Nothing frustrates people more than being ready to buy but finding out what they want is unavailable – or they have to wait a long time for it. Be sure the logistics side of the business is in sync with the sales/marketing side.
  • Be sure your pricing is still competitive. Even though competition is limited, you can easily price yourself out of the market. Know what your competitors’ prices are, and respond appropriately.

c) Your product is very new, unique & different:
Congratulations! what you offer is new, solves real consumer problems, and is not easily copied (i.e. hopefully patented). You have a great advantage, but you still need to sell.
Ÿ Highlight your differentiation in a meaningful way to consumers/customers. Be sure product or service claims are accurate and relevant to them – not you.

  • Focus on core benefit(s) – not features per se. It might have a different feature, but does it REALLY matter to your customers/consumers?
  • Be sure you proudly communicate your differentiation. Do some type of advertising and/or event marketing to “tell your story” and build awareness.
  • Keep it simple. Differentiation can be very technical. Don’t assume your consumers/customers understand what you’re saying. Avoid jargon. If they don’t understand what you’re saying you can’t expect them to buy your stuff

The bottom line is that you and your sales force need to remember three basic rules when managing your offering in the marketplace.

1) Stay Relevant.  Can your customers/consumers see the value in your product benefits? Remember, they tend to look more at benefits than product features. Are your products still relevant and provide value?

2) Be Sure You Can Measure Your Differentiation.  If you can’t measure how you’re different, how can you expect consumers/customers to see it? Are your product claims accurate? Are you getting third party recommendations and/or awards? Visible differentiation is always better than conceptual.

3) Continuously maintain/upgrade your product line.  Competition is always out there, hard at work trying to gain a competitive advantage over you. Don’t assume your competition is standing still and doing nothing.

If can keep these basic rules in mind, you can avoid competitive lower pricing – and commoditization – you will maintain a profitable and sustainable business.

Rick Steinbrenner
Global Marketing Officer
Brand Marketing Advsiors
www.globalbrandguy.com
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Brand Marketing Advisors are specialists in global brand marketing and new product development.  We help consumer product companies to more effectively compete in product categories in/around the home.  We strive to uncover unmet consumer “need gaps” while partnering up with R&D/engineering to come up with true innovative product and marketing solutions.  We accomplish this through a combination of marketing research, consumer insights and creative thinking.  In most cases, this leads to a strategic and sustainable competitive advantage for our clients.

Rick Steinbrenner Head Shot - Cropped w/red borders

Our team is led by Rick Steinbrenner – Chief Marketing Officer / Principal.  He’s led and managed leading global brands like General Mills, Kraft, Remington Products and Black & Decker – just to name a few.  He’s worked as a brand leader and general manager in both small & large companies up to $12 billion in sales.  His track record speaks for itself – developing and launching over 20 new products that are generating over $200mm+ in sales – both in the B2C and B2B sectors.

Which Is Better? – Marketing or Unmarketing™

Post first published 4/2/13 in the “MENG Blend” on the Marketing Executives Networking Group website – www.mengonline.com.  The destination site for leading marketing executives looking to stay ahead of the curve.  We have more than 1800 of the leading marketing minds in the world eager to meet, communicate, help and share our expertise. 

Which is Better? – Marketing or Unmarketing™ 

Does Marketing Really Work?

Does branded marketing and/or national brands really work anymore? Some people don’t think so. Whatever your point of view is you can’t ignore this simple truth. The combination of retailer and manufacturer consolidation combined with shareholder pressure to have successive quarterly earnings growth has done a lot to commoditize consumer product businesses. This has led some consumer product companies to stop innovating/marketing altogether because some don’t see it working anymore. There are many reasons why, but here a few big ones:

Innovation activity has and will most likely continue to decline:

According to the Nielsen company (a major consumer products research firm), of the 11,000+ new products they’ve evaluated over last three years less than .5% of all new product introductions met their breakthrough innovation criteria for success – that’s only 34 new products! While it’s always been true only a small % of new products ever achieve commercial success even during good times, there’s no question companies have been dialing back new product programs at an ever increasing rate. Nielsen also found the total number of new product initiatives decreased 6% annually since 2008 in the consumer packaged goods sector. While some of this decline can be attributed to lower economic activity there can be little doubt companies are innovating less not more. What I’ve also personally noticed are companies have radically changed their new product initiative risk profiles due to continuing Wall Street pressures to have these programs payout in less than 12 months!!

Decreasing importance of “national” brands:

National or manufacturer brands are having a hard time holding their own these days. According to Nielsen and the PLMA, store brands now account for almost ~25% of ALL retail supermarket, drug chains and discount store sales and growing. They also state 80% of consumers now believe store brands’ quality is equal to/exceed that of their national brand counterparts. This has led to the “commoditization” of many product categories. In some categories, retailers have “kicked out” the national brands altogether in favor of their own brands. While I don’t believe store brands will ever be 100% of sales, what is true is that national brands share of retail sales is decreasing and will continue to do so in the future. This is clearly a competitive threat.

Consumers don’t really believe what brands say anymore:

According to the Futures Company, the global strategic insight and innovation consultancy, a poll of 28,000 adults in 21 markets found 86% thought big business maximized profits at the expense of customers and communities. In Jonathan Salem Baskin’s e-book “Branding still only works on Cattle”, he takes this fact one step further by saying – “Brands are suffering the same declines and shortfalls we’re seeing in corporate reputations. Trust is a synonym for BELIEF and perhaps the strongest indicator of PURCHASE INTENT and subsequent LOYALTY”. Branded marketing clearly has a integrity problem today leading more people choosing NOT TO BUY vs. buying brands that supposedly have the right feature/benefit package.

These factors and others have many now saying “Branded Marketing is Dead”. It’s obvious we need to come up with a new way of thinking about branded marketing for the 21st century.

How about Unmarketing™?
Mr. Baskin goes on to say in his e-book “the 21st century model for brands will shift the emphasis from getting consumers to say YES to entertaining but otherwise meaningless engagement, and engaging with them on substance to which they’re allowed to say NO”. This is because people don’t really want to be sold on anything anymore, they want products/services that will help solve their unique problems – even if it means you might not make a sale today.

On the sales side of things, Peter Bourke: Principal & Vice-President of The Complex Sale, Inc. – a sales leadership team consultancy (www.complexsale.com) – makes the argument sales teams (closely allied to marketing teams) needs to unsell in today’s marketplace “selling more by Unselling™” as he coins it. This is because selling has become what the buyer REALLY expects in a sales call. The problem is most buyers/clients don’t want to be sold. The goal should be to make the buyer more receptive because they don’t feel like they’re being sold. It might appear to be obvious, but many companies still resort to the “old” way of selling.

Old approach to making cold callsUnselling™ approach to cold calling
“I have a product/service that best fit your needs” (presumptive at best).“I have a product/service that MAY fit your needs and if you’ll allow me to ask a few brief questions about what/whom you’re using now I may help determine if my product/service is even worth your time evaluating.”

It’s funny; this selling approach has been used very successfully on the marketing side in the past. Please see the short video below on how 7Up developed and executed the “Uncola” campaign in the early 1970’s. It featured Geoffrey Holder before he played Punjab in “Annie,” as well as playing a supporting role as Baron Samedi in the 1973 James Bond 007 movie – “Live and Let Die”.

Case Study – 7Up – The UnCola


Geoffrey Holder – “Cola vs. Uncola Nuts”

As you can see the account team & creatives at J. Walter Thompson (7Up’s agency at the time) correctly identified a unique consumer solution – a clean, light, wet and wild refreshing soft drink that wasn’t a cola. It was also strategically correct since it allowed 7Up NOT directly compete against the soft drink giants – Coke & Pepsi. The result was increased sales and brand equity for 7Up.

Bottom Line:
It’s time for branded marketing to re-define itself. We need to start Unmarketing™ our initiatives/products focusing on a more collaborative approach helping consumers solve their problems – even it means we don’t sell anything today. This means creating programs and products that builds trust and credibility. I know this is a long term approach that might not payout in “10 minutes” as required by most Wall Street/Finance people. However, what’s the alternative – continue to do marketing the same old way and then say it doesn’t work? We need to break this self-fulfilling prophecy and really change the way we do branded marketing going forward. If we do this, I think we might find a new renaissance in marketing because it will “work” again. The question is: what are you doing in your organization to make this happen?

Rick Steinbrenner
Chief Marketing Officer/Principal, Brand Marketing Advisors
www.globalbrandguy.com
The Global Brand Guy