In the media we see product differentiation all the time, whether the subject of the commercial is a distinguishable product like a luxury car or an indistinguishable product like laundry soap. In marketing , there should be no such thing called a commodity. All goods and services have the capacity to be differentiated. Many marketing textbooks tell us that there are products that cannot be differentiated and the usual presumption about so-called undifferentiated commodities is that they are exceedingly price sensitive.
With commodity products, fractionally lower price should gets the business!
That is seldom true except in the imagined world of economics textbooks. In the actual world of markets, nothing is exempt from differentiation.
In the marketplace, differentiation is everywhere. Everybody from manufacturers, sellers, brokers, agents, merchants tries constantly to distinguish their offering from all others. This is true even of those who produce and deal in primary metals, grains, chemicals, plastics, and money.
What is a commodity product?
Commodity products are largely undifferentiated products that offer little or no perceived differences between competitive offerings. These are products or services with high levels of substitutability. With little-to-no perceived difference, consumers usually shop for commodities primarily on a low price basis.
Producers of commodities are usually driven to compete on low price and high volume. In general, the product life cycle is at the point where significant customer education and assistance is not required, customers have widely adopted the product and the market is mature enough to have attracted multiple competitors.
Why do customers buy products?
- A car is not simply a machine for movement ,visibly or measurably differentiated by design, size, colour, options, horsepower, or kilometres per litre. It is also a complex symbol denoting status, taste, rank, achievement, and aspiration.
- A computer is not simply a machine for data storage and processing of information, but it is also an operating system with special digital software protocols, media centre for music, videos, DVD playing, video and, mobile calling and much more.
- A packet of rice is not merely a plastic bag with rice grains to satisfy an empty stomach. It is a health giving, aromatic , sweet-smelling , exotic food full of vitamins and high energy grains.
To the potential buyer, a product is a complex cluster of value satisfactions. The generic thing is not itself the product; it is merely the minimum that is necessary at the outset to give its producer a chance to play the game. It is the playing that gets the results, and in business this means getting and keeping customers through value adding uniqueness.
The customer never just buys the “generic” product like steel, or wheat, or investment banking, or aspirin, or engineering consultancy, or golf balls, or industrial maintenance, or newsprint, or cosmetics. He buys something that transcends these designations—and what that “something” is helps determine from whom he’ll buy, what he’ll pay, and whether, in the view of the seller, he is “loyal” or “fickle.”
Examples of commodity differentiation
- Whether it’s a 1000 page consulting proposal or a 5 paged document to industrial clients, the product is a promise whose commercial substance resides as much in the proposer’s carefully curried reputation (or “image”) and in the proposal’s meticulous packaging as it does in its physical content.
- Lets’ take retail banking for example. All banks promise to keep your money safe and offer mostly similar interest rates. Banking products are similar across the board but their promises are packaged extremely differently and profoundly influences their buyers.
How to Differentiate your commodity product and service
1) Conduct a comprehensive audit
Launch an initiative to understand how your current clients perceive you and your product or service. Conduct a brand audit and conduct primary research to understand why your customers choose your product. Commodity marketers are often very surprised to learn from customers that price is not the most important factor—let alone the only factor.
2) Find and define points of differentiation in your product or service
Once you have conducted your audit and surveyed the competitive landscape, then you can make a list of all the ways you are unique.
- Create new product features
- Provide incremental changes or benefits
- Package and bundle several benefits into your product offering
- Change your payment terms and length of guarantees
- Increase reliability of your product by enhancing the quality
- Get your product to your customers faster than your competition
- Differentiate your product through clever , creative packaging.
3) Choose the most compelling and unique point of differentiation to create a strong position for your brand
Perhaps even more important than defining points of differentiation for your brand is to make sure these points offer customer value for which your targeted customers recognize the value offered.
4) Be honest with yourself and seek to uncover and understand the reasons customers choose to not do business with your company.
5) Create a powerful image for your commodity brand.
Create and build a powerful image for your brand. Once you make your product or service distinctive, build your new image through a combination of words, imagery and other devices that appeal to human logic and emotion.
6) Market the brand
Brand communication is an essential part of building a strong brand for your commodity. Commodity products require unusually clear communication of the value offered in both economic and emotional terms.
While differentiation is most readily apparent in branded, packaged consumer goods, in the design, operating character, or composition of industrial goods, or in the features or “service” intensity of intangible products, differentiation is also about how powerfully a company operates its business. In the way that your marketing process is managed may reside the opportunity for your company to escape the commodity trap.
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