When Commoditization Is On The Horizon: Don’t Become ”Just Another Product”

Commoditization seems to be constantly nipping at our heels. Like gravity pulling us back to earth, natural forces tend to drive our products toward sameness with competitors over time. We’ve all seen what happens when this occurs: growth stalls and profit margins erode.

Business, technical and societal changes are making it harder, in some ways, to differentiate now than in the past. These changes include: the rise of powerful procurement groups, who force suppliers to deliver to standardized specifications; the improved visibility, via the web, into competitor offerings; the ready availability of non-proprietary technology; outsourcing of functions such as manufacturing, customer service and technology development; and just plain “me-tooism.”

Here are three things we can do to resist these forces and to differentiate from competition:

1. Stop doing what customers suggest. Listening to customers has always been important, and new technologies have made it more efficient to do so now than before. Collecting information from online reviews, holding customer advisory boards, working on the front line, visiting customers (and talking to all the functions, not just the “decision makers,”) and getting to know your “customer’s customers” are a few of the ways strong companies stay in touch with changing customer needs. Many of these efforts, however, tend to accelerate commoditization. Customers to ask you to provide everything your competitors are providing, and you, eager to please, say “yes.” Listen hard to what customer’s say, but more importantly, watch what they do. If your products are online, observe which of your products are getting pinned on Pinterest, and by whom. Watch how your most demanding and forward thinking customers are using your products, and your competitors’ products. Observing how these “micro-niche” customers behave can provide valuable ideas for breaking out of the pack.
2. Anticipate competitor moves, and then do the opposite. If you want to differentiate effectively, look not just what competitors are offering, but how they think. Look at who their top officers are, where they came from, and what their M.O., or modus operandi, Even thirty minutes spent looking at management bios, listening to investor calls and perusing LinkedIn can yield great insight into the minds of your competition. Resist the urge to copy features and services offered by the competition. Instead, anticipate what they might do next, and consider doing the opposite.
3. Take away, don’t just add. Don’t fall victim to the temptation to add features, services, products, and markets every year. Consider how you can differentiate by taking away features, by doing less. Ikea is a good example. They eliminated features that were standard fare in other furniture stores. They took away in-store service, delivery and assembly. The stores are almost entirely self-service, but Ikea makes shopping fun through inspiring displays and ready availability of tape measures and note pads. Customers have to carry the products home themselves, but Ikea packages them cleverly into small boxes that fit easily into a vehicle. Customers have to assemble the products themselves, but Ikea’s simple, stick figure instructions make it fun, like assembling a Lego toy (the Journal of Psychology reports that customers like their product more, and are even willing to pay more if they assemble their Ikea product themselves – amazing!). While other furniture stores emphasize the durability and timelessness of their products, Ikea makes us think of furniture as a fashion accessory, something we can use for a while, and then replace. By taking away features, Ikea creates a compelling customer experience, and keeps prices amazingly low.

By watching what customers do (not what they say), by anticipating competitor moves (and doing the opposite) and by considering what to remove from our product offerings (rather than adding features), we can avoid getting sucked into the torrent of the mainstream. We can distinguish our products and services from those of competitors and enjoy healthy margins and growth.