Commodity products lead to commodity pricing and squeezed profit margins. What can you do about it?
From Commodities to Premium Priced Products
Let’s take a look at a few examples of differentiation.
Bottled Water: Why would we pay more for a product that comes out or our faucet for essentially no cost? Images and perceived better taste and quality have led to a multi-billion dollar business. Fiji Water comes from the Fiji Islands and is regularly sold in the United States. Think about the profits involved that allow companies to ship water half way around the world.
Gasoline: All brands of gasoline are derived from oil. The oil is shipped in enormous tankers and then refined. One barrel should be the same as the next. What is different between brands like Exxon, Shell and Gary’s Gas and Grub? The “secret sauce” of additives and hundreds of millions dollars spent on branding. Is generic gasoline really inferior or a bargin?
Eggs: Chickens lay millions of eggs each year. Other than size what is the difference? Eggland’s Best brand eggs claims to be better for you. Eggland’s Best receives prominent shelf space right next to the store brand eggs. Should I buy a product that can easily cost twice as much money?
The Takeaway
Differentiate your products to make them non-commodities. Your branding helps to show your unique selling propositions.
Those are my thoughts. Over to you. Please comment below.
- How have you differentiated your products or services?
- How have you been able to rise above commodity pricing for your products and services?
- What other examples of commodities that are differentiated can you share?
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13 replies on “Differentiated Commodity Products Drive Profits”
I’m happy to say that I buy most of the products I need from local farmers markets. Living in Southern California we’re surrounded by lots of them and are not hard to get to. But I think the big reason I do this is because of the convenience that Sherryl was talking about. Would I still make purchases this way if the convenience wasn’t there? I hope I never have to find out.
Dennis:
When we lived in LA we used to go to farmer’s markets as well. There is the trade off between convenience and price.
Rob
I really enjoyed this post. It hits home!
Water: I’d never pay for bottled since my tap is clean, flourided, and cost effective.
Eggs: I do pay more for Egglands… specifically the cagefree because I believe that chickens should not be kept confined with barely any room to move. That’s just cruel!
Gas: I actually research about additives placed by certain companies that can damage my fuel line!
It is a great thing to be able to make choices based on what we feel is best for us. For me it comes down to quality. I truly believe that people would choose to pay more for excellence and for hassle free peace of mind. I strive to provide that for each of my clients.
Keyuri:
Glad you can relate to the post. Would you share with us what you found about additives in gasoline?
Thanks,
Rob
Bottled water amazes me but I’m guilty of buying it to. Another commodity that I can think of that is a premium priced product would be packaged salads. Those are very popular but much more expensive than assembling your own. The commonality between these two commodities is they have differentiated themselves at least partially on convenience. People (like me) are willing to pay more for convenience.
Sherryl:
The salads in a bag are a great example. A head of iceberg lettuce can be purchased for around $1 while the packaged ones are $3 to $4.
Rob
Hi Rob,
I love your posts. They are clear, concise, and valuable.
How have I differentiated my services? I give away TOO much for free! Seriously, I need to stop that LOL. I so enjoy what I do and love it when I get one of those “aha” moments, that I end up giving away the store! That is a slight exaggeration – I do get paid too.
Marketing products and services is a really saturated industry. In order for me to stand out from ALL the others, I rely on relationship building and getting to know my prospects. Relationship building is key in all businesses today. From what I have been told by those who do get to know me on a professional level, I am creative and extremely helpful in my approach to marketing. They say I take the time to understand their business and specific situation and offer very valuable suggestions on what path to take. I am not one to toot my own horn – am actually a very humble person, hence my repeating what others have told me 🙂
Julie:
Thanks for the kind words about my posts. I too am guilty of giving away time to others. We need to monetize our time since it is fungible. That is a great word I learned in Business School. It means that once it is gone it is gone. You cannot bill for those hours you gave away.
Relationship building is really important. Taking that time will set the engagement off in the correct direction.
Rob
Hi Rob,
Good examples and I think bread is another one. It used to be white or brown. Now there are so many varieties. Another example is margarine especially the ones that play on the cholesteral and the health factor.
An understanding of trends, customer motivations, values, fears etc can lead to ideas for product innovation to get out of the commodity trap.
Susan:
You definitely added a couple of good examples. Good to hear from you.
Rob
It seems to me that these names were well surveyed. People were polled and asked what made thing think of fresh clean water or what would make them buy an egg.
I have learned to survey any important name. I just spend weeks surveying titles for a book I’m working on. There are many options, but one stood out as best. It is the one that will make people pick the book up and give my techniques a try.
You can’t guess on these and it does take work, but once you have the correct name, you’re set!
Laura:
Branding is so important. If you just another book or just another system you get commoditized. By the way, what title did you end up going with for the book?
Rob
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