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Brand Strategy

How Brands Can Conquer Commoditization

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Eventually every product or service will become a me-too commodity that competes on price alone. The pace of product and service innovation is now so accelerated that one can hardly determine who is first to market with a valuable new idea before a competitor knocks it off, adds a feature and lowers the price.

Whether the innovation is radical and disruptive, or lesser incremental improvements to features and functions, everything will, in time, be commoditized to the lowest common denominator. However the time it takes for this to happen is shrinking exponentially.

Continuous improvement is no longer enough.

A little over a decade ago the mantra of “continuous improvement” was what everybody in product development believed was fashionable thinking. That’s no longer so. The rapid pace of innovation happens too fast. Regardless of the product category, very soon everyone else will be offering those same features. Everything becomes at parity with everything else. In an effort to exploit full market potential, marketers are charged with broadening the appeal to the largest customer segment possible. Eventually every innovation becomes watered down to a commoditized version of itself.

This established trend has critical implications for marketers struggling with brand relevance and differentiation–especially in low emotional involvement categories like soft drinks, breakfast cereals, underwear and car insurance.

Recently at The Un-Conference in San Diego, my colleague Brad VanAuken challenged participants to a “branding commodities “ exercise to brand bottled water. Nothing could be more ubiquitous and similar in form and feature – it’s water!

The results of the participant’s creativity and ingenuity in that exercise sparked my deeper thinking on the idea that if any innovation can be commoditized, it can be equally un-commoditized!

Innovate greater meanings not more functions.

It’s my belief it will be essential for marketers to realize that new products, no matter how innovative at their introduction, will become the accepted norm in the category at vastly discounted prices. Seemingly more and more innovation just speeds up the race to the middle if not to the bottom.

The question now is how do marketers turn this me-too trend around and differentiate product brands on something more transcendent then function or performance?

Staying ahead of the commodity curve.

To lock onto relevant differentiation means to provide something that is highly valued and not in abundant supply. People naturally place more value on things (ideas too) that are limited than things that are abundantly available.  Innovate greater meanings not more function. The infinite value of product innovation is found in what the innovation means to people. Marketers must answer the difficult question – how does the innovation add to the deeper life experience of the intended user/ consumer?

In the face of this rapid commoditization of everything, marketers must buck this trend by using their collective creative imaginations to fashion a higher (more relevant) meaning around their products and services. In the imagination, there is no shortage of supply. Everything needed is present – it’s just not in form.

Starbucks did this by making the experience of coffee uniquely different. Swatch did this by focusing on creating a unique means for personal expression while their competitors were innovating precision time keeping through quartz technology. Precision time keeping is table stakes for a watch brand. Fruit of the Loom dominated men’s underwear – available everywhere for about $1 a pair until Calvin Klein un-commoditized the category by presenting the valuable idea that it’s ok for men to feel and be sexy. For that valuable new meaning men happily paid $5 a pair!

When your brand or product provides new meanings to people, it automatically extends it’s use value to people in such a way that price is no longer the issue and competitors are no longer relevant.

The expression “what got you here, won’t get you there” has never been more true. To get “there” requires a dedicated and continuous creative effort to uncommoditize your value to people by proposing new meanings that separate your brand from the slush pile.

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1 Comment

Dan Hogan on June 06th, 2013 said

Thomson, you have raised some very poignant arguments with the challenges of branding products in “me too” categories. Many of us have been faced with what seemed like insurmountable hurdles to establish brand identity in market categories that have gravitated (too quickly) to price as the key driver – as you’ve mentioned. Your comments about focusing on ‘new meaning’ for your target audience resonates with me loud and clear.

Along this same line of thinking, I offer a couple of thoughts for consideration for those who are struggling with branding strategies. First, most people make decisions based on subjective criteria, not objective criteria. It is true that the majority of shoppers in all categories think they are making purchase decisions based on a set of criteria that leads them to purchases of the “best” product for the price. However, when it comes down to which product consumers actually reach for, it is not always based on price, or perceived value. I think it comes down to what that brand “means” to the individual.

My second point is that given consumers (for the most part) make purchase decisions based on subject criteria, then why do marketers continue to focus messages on features, value, and specifications – these all fall in the mix of objective criteria. What I have been advocating most of my career is to not tie your brand to a value proposition (objective criteria), but instead tie it to an “appeal proposition” (subjective). Consumers are attracted to all different sources of info to influence their buying decisions, but the strongest influences are the ones that appeal to their tastes and desires – which become the elements of their experience with a brand.

If marketers are not out trying to be everything to everybody, then I strongly suggest they focus efforts on messaging that supports the kind of experience they want consumers to have with their brand (regardless of what tier in the pricing hierarchy they are targeting).

Dan

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