Avoiding Commoditization with Hi-Tech Solutions - Part I

Part I – “From Concept to Commodity”

If you are a manufacturer or a supplier, you have most likely experienced both the thrills of a new product introduction and the plague of petty, price-warring sales. In the short time after a new concept is introduced (provided that it is viable) there is a period of rapid growth and high margins. However, as the market matures and “early adoption” is long forgotten, commoditized prices ensue and you’re left wondering, “What next?”

In next week’s article, “Dare to be un-shopped,” I will address specific strategies for avoiding, or at least prolonging, this phenomenon. However, the first step in addressing the problem of commoditization is to understand the business factors that cause it.

When asked about their plight, suppliers in a commoditized market are quick to tell you it’s those nasty competitors they have, always dropping prices. This may be a true observation from one perspective, but the reality is that competitors don’t drive markets, consumers do. Where you see so-called “pant-dropping” prices, it is usually in response to shrinking market share that results from a flood of competition. However, where you see this flood of competition, you’ll find it is in response to unmet consumer demand.

According to capitalism, competition is good. It keeps prices equitable and motivates innovation. So what is the difference between equitable prices and commoditized prices? Simple… the absence of innovation. When the most innovative new concept that competition pushes us towards is to make our product less expensive, commoditization has begun.

So, how can it be said that consumers, not competition, are the driving force of commoditization? When consumers perceive that all products are the same, their only real factor for selecting one supplier over another becomes price. The key for every business is to not become concerned with the competition because in the end, you cannot prevent competitors from entering your market. Instead, businesses should focus on the consumer’s perspective. If to the consumer you have no competition, then price is the last thing on their mind.

Communication: The Interface of Your Company

Ever since Starbucks was hailed for selling a “customer experience,” not merely a product, the marketing glossary has been reinvented. In boardrooms across the country, marketing executives pontificate about their brand experience, customer interaction strategies, and corporate culture. I try to keep my eye-rolling to a minimum, but I could not help noticing the remarkably simple approach that a colleague of mine recently presented.

I have had the recent luxury of working with J.S. Design Concepts, which has recently been rolled into a division of Carter & Co. As an Industrial Design firm, J.S. has a wealth of experience in designing user interfaces for consumer products. As I learned about this unique design process and I considered our current projects, we soon realized that the methodology for creating a user interface is one in the same with the daily challenges of marketing communications.

Consider each message you send as another button on a panel, or options on the LED screen. With each function you want to present, the interface designer must predict and cater to the ways a user would interact. The marketer’s challenge is no different. Will people hear us if we abandon print and go entirely online? How do I direct prospects to our website? How are leads received and dealt with? Moreover, the interface that a marketer creates must first make the “user”—the prospective customer—desire to interact in the first place.

It’s vital in marketing to consider the complete interface that we create for our audience. We must predict our customers’ interaction with our message and create an interface that’s user friendly and effective—from first impression to the closed sale.