Five Ways to Avoid Commoditization in Your Business

5 Ways to Avoid Commoditization in Your Business

A common experience many of my clients are facing today is the fear that they have become commoditized.

“Commoditization is defined as the process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers. The key effect of commoditization is that the pricing power of the manufacturer or brand owner is weakened: when products become more similar from a buyer’s point of view, they will tend to buy the cheapest. [1]”

Decreasing profits and increasing competition characterize commoditization. This is a fact of life in most industries today for many reasons. In the eyes of your buyers, products and services are less and less differentiated.

At the same time, we have seen a significant transformation of consumer behavior. They are more informed about the products and services they want to buy; they are armed with comparative data about quality, availability, and price; and they are determined to be successful on their terms.

How To Avoid Commoditization

So, how do you and your company respond? In an excellent Fortune article, Verne Harnish (founder of Gazelles, Inc., and author of Scaling Up) focuses on simple strategies to help your company stand out, avoid commoditization, and maintain healthy margins. Here are five ways to avoid commoditization in your business:

  1. Create a third market place
  2. Target the right customers
  3. Add a dose of expertise
  4. Don’t keep them (customers) waiting
  5. Amp up the personal touch

Be sure to read the full article. Then put this topic on the agenda of your monthly Leadership Team meeting and discuss how to apply these strategies. In my opinion, commoditization is one of the top enemies of Clarity in any business.

Contact me to discuss commoditization, how it is impacting your company, and how you can respond.

All the best

[1] Wikipedia
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