Solving the Commoditization Problem

Marshall Sponder at WebMetricsGuru picked up the discussion on loyalty, and added some great examples of whole industries suffering the commoditization problem:

"If you look at the PC Industry - it hardly matters which brand you buy (most PCs and monitors come from the same factories in China - anyway (you did not know that?) .... only the designs are slightly different) - it's all about price and processor performance now.   

"So we might come to the concept that it's important NOT TO COMMODITIZE your service if you want it to survive - long term ...or at least - move the "goodies" up the value chain ...."

Sponder goes on to provide additional examples, such as architects who sell house plans online. They want him to raise their search engine rankings, apparently without really adding anything new or better for their customers. Customers look at the plans and see a lot of the same thing. i.e. an undifferentiated product and an undifferentiated experience.

The problem, as Sponder says, "is everywhere."  Very true.

We know the problem, what's the solution?

The solution is to segment the market based on customer attributes, desires and unmet needs, and start finding ways to serve the segments better. A commodity product or service treats everyone as if their needs were the same. How can this possibly be true for a house?

Let's look at flour, clearly a commodity. But...there is all-purpose flour, pastry flour, easy-blending flour. I pay a premium for a little can of flour that has a shaker top. It's great for making roux. Is the flour different? No idea. It's the package that is meeting my needs. And I appreciate the company more because they make that effort.

A house, for most people, is the largest purchase they will ever make. Surely there are opportunities, even for those buying their home plans on line, to add more value to your customers. [And we stand ready to do the research that would uncover these unmet needs, these opportunities to stand out from the pack, operators are standing by....]

Branding works because it meets our need to feel special and different than others. We have a self-identity, and we want to use brands that match it. Branded experiences combine the best that product and service innovation can create with the best that marketing can offer. It's real value, not fake value. And people pay for real value.