Commodity creep happens when companies, their employees and distributor networks descend into the mindset that the product they provide is nothing special. They no longer realize, see or value the uniqueness within their company or products. It leads to a transactional mindset that diminishes every facet of their company—profit, quality, morale and much more.
This commodity creep can happen to any company in any industry, from automotive to food, paper goods to jet engines, large and small companies, those that have been around only a few years and those that have 100+ years under their belts. If a brand is not proudly positioning their products as unique and valuable, they are a commodity.
Many view commoditization as an inevitability of doing business. I am here to tell you, it is not. There are steps companies can take to avoid commodity creep within and outside their organizations and defeat the commodity monster.
Why battle the commodity mindset?
A company that operates with a commodity mindset will be most vulnerable to global competition because it’s selling on price alone. It is impossible to build a loyal customer base when the only purchase driver is price. Global markets, where labor is cheaper and products can be made at a lower cost, will win the battle against higher-priced commodities. As this commoditization of a brand continues, margins are squeezed ever tighter, resulting in little to no profit, depleting the opportunity to invest in new products.
The commodity mindset also stifles innovation, creativity and inspiration—the very things that prevent a product from being relegated as a mere commodity. Business scholar and author Peter Drucker summed it up perfectly: “In a commodity market, you can only be as good as your dumbest competitor.”
Inside a company, commodity creep lowers morale and job retention. Employees must see meaning and value in what they’re building, selling and supporting. When they see value, they’ll be more likely to view their company as a destination rather than a steppingstone to bigger and better things.
How to Defeat the Commodity Mindset
- Don’t feed the commodity monster. Resist thinking of your product as a commodity. Otherwise, it will become exactly that. It starts with telling the story of your uniqueness and celebrating it with employees—from leadership to line workers. This inspires and engages them with the product and the value they deliver to customers.
- Develop a deep understanding of your customers. Your company must thoroughly understand its customers and how/why they use a product in order to bring additional value to them, going beyond price-based selling. Once you understand this, you can create ways to enhance the product and the ownership experience.
- Discover the differentiation. It may seem like there is nothing or very little about a product that sets it apart from a competitor. Take time to dig deep and discover anything that may be a differentiator. Is it a process, a piece of equipment or lean manufacturing? Even if it’s similar to what a competitor does, if they aren’t promoting it, you can be the first to own it.
- Promote your people, not just your product. No two companies have the exact same people on their team. It’s a significant differentiator that often gets overlooked. Promote their uniqueness, experience, certifications, education—anything that differentiates.
- Capitalize on where you offer more. Customers are often looking for more than just the product itself. Promote the additional value-added services and products you offer. For example, do you provide insightful content to customers that enhances their experience?
- Never stop innovating or reimagining. Is there a new or spin-off product that would benefit your customers? Maybe there’s an extra service you can bundle with your product to provide value and convenience. Continued innovation can keep a product relevant and competitive in the marketplace. Try an open innovation model that encourages ideas from every area of a company, rather than relying solely on R&D experts. Customers are also great resources for evolving or reimagining products and services.
Avoiding commodity creep takes effort throughout an entire organization, from leadership to manufacturing to sales and everyone in between. When you consider the consequences of falling prey to the commodity mindset—diminishing sales, low morale and poor quality—it’s well worth the time and investment. There is something about what you do, your product, team or processes, that makes you unique. If there wasn’t, you’d no longer be in business. Discover those differentiators, then promote them inside and outside your company to defeat the commodity mindset for good.