Thursday, November 17th, 2016
The term commodity is used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market. A commodity has full or partial fungibility; that is, the market treats its instances as equivalent or nearly so with no regard to who produced them.
In short, when we offer looks like all of the others, price is the only thing that matters. Commoditization is a fact of life in many markets, but that doesn’t mean it can’t be defended against.
Staying on top is more than simply “meeting needs”. Instead, discovering customers’ goals and creating solutions to help achieve them will differentiate and add value to your products and services.
Even when a raw material has no value added and quality standards are set by law or the industry, there is still plenty of opportunity for differentiation around availability, delivery, shipment quantities, payment terms and all the other services that accompany the core product. Moreover, there is no such thing as a product that cannot be improved by segmentation.
We must use our imagination. “There are no mature products, only mature companies”. We must recognize that the other side of commoditization is specialization. A “full service” isn’t a strategy, it’s the absence of a strategy. Specialize your products and services.
Summing-up: However you approach commoditization, try to innovate at all costs to beat it back because in a commodity market, we can only be as good as our dumbest competitor.