Think you don’t compete in a commodity category? Think again.
A ‘commodity category’ is usually thought of as one with non-differentiated products. Go into your local drugstore and you’ll see lots of them; brand name products sitting right next to store brand products that are exactly the same, but cost a lot less. Here, the real differentiator isn’t what’s inside the package, but what’s outside: the brand name. And even though it may not make rational sense, most people feel that Bayer Aspirin or Tylenol is worth paying a lot more for than the same thing from Walgreen’s. However, commodity categories are not just confined to your drugstore shelves.
I was once leading a workshop for a global aviation organization. As the undisputed leader in its category, they continually invested in developing breakthrough technology. Yet, when I asked this group of experienced, senior level executives if they would feel better if their family were flying on an airplane powered by their technology, the answer was a real shocker. “No sir!” said one of their VPs. He said he would feel just as good if his family were on an airplane powered by one of his competitors. For while there were technological differences, this was a highly regulated category and so every part, both theirs and their competitor’s, was manufactured to the same standards. What he was saying, without realizing it, was that despite their proprietary technology and a long list of patented advancements, this leading technology company often found itself competing on price. Just like Bayer aspirin.
Let’s go from aviation to pizza. Most families with hungry kids order from the place with the best deal. Domino’s? Pizza Hut? Little Caesars? A hungry 7-year probably couldn’t care less. However, Papa John’s smartly de-commoditized their brand by owning the quality high ground in the category with ‘Better Ingredients. Better Pizza.’ Pizza Hut thought it was such a good idea they sued – and lost – and are left to just keep shouting “Deal! Deal! Deal!”
Truth is, every marketer should think and act like they are in a commodity category. Having a ‘commodity mindset’ forces you to do everything possible to create real differentiation and instill a perception of superiority. It is essential to always justify real and perceived value, keep competitors playing catch-up, and never be lulled into a false sense of confidence.
Even in categories with little real differentiation, the perception of superiority can be created through greater creativity in media and marketing, continual product innovation or improved packaging. And if you start getting a bit complacent, feeling that you are shielded from someone else commoditizing your product, service or technology, my advice is simple: always keep one eye in the rearview mirror and both feet on the gas pedal. I’m sure one of folks who still works at Blackberry would agree.This entry was posted in General. Bookmark the permalink. ← Defining a brand only by product innovation is high-risk, high-reward. Private Equity needs to be more focused on Brand Equity →
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