Bruce Greenwald, a Columbia Business School professor, once famously said "in the long run, everything is a toaster," in reference to his view that at some point, all great innovations become commodities that are sought by consumers on the basis of price alone.
By today's standards, even toasters are more than "just a toaster" with countless product and marketing innovations over the last 110 years that transformed the simple device into a multibillion-dollar industry.
Bruce's flawed conventional wisdom is shared by many managers in companies everywhere whenever they encounter a moment of 'price only' competition. They immediately reach for the commodity panic button and slash prices, service, profits and often their own necks in the process. Innovation and better marketing could have saved them.
Market your way out of commodity status
Consider price as only part of the equation. Dyson vacuums entered the US market long after the former market leader, Hoover, had deemed vacuums a commodity product and priced themselves into a market-bottom pricing strategy. Dyson now owns over 21% market share in the US (to Hoover's 15%) selling vacuums in the $300 - 500 range (to Hoover's $75 vacuums).
Develop differentiation based on competence. Competence based or thought leadership marketing makes your firm more desirable to buy from based more on what you think and say than what you make and sell. Gillette, Cisco Systems and even Google (even though search is "free") leverage public relations and customer education to increase market share and profit margins.
Understand your customers. The most common response to my question "have you asked your customers what they want and why they buy from you" is a flat "NO." How can you say that you're a commodity, competing on price alone, when you don't even know why your customers chose you (and continue to do so) in the first place? Get out and ask questions.
Segment, target and position. Often companies are doing business with the wrong customers. When you serve a market segment that values everything you offer as a company (including knowledge, competence, price and other tangibles) profits, loyalty and satisfaction flow easily. When dealing with a strictly 'economic' buyer, the rest of your value and differentiation is lost on them. Review your marketing focus yearly to ensure that you are still focused on the right customer and make some hard decisions.
Do commodities still exist?
The more one looks at so-called commodities (anyone buy bottled water lately?), the more you'll find that commodity is generally a term in rhetoric only and often employed by companies who have lost the drive to innovate, engage in intelligent marketing or truly understand the value their customers' require from them. Most commodities exist only in the mind of the misguided manager. In the long run, not even a toaster is really just a toaster.
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