Thanks to technology, globalization and a host of other factors, commoditization is on the rise. This rapid rise presents a number of challenges to businesses and brands in nearly every market and every industry.
In light of this increase, our team discusses what's behind the surge in commoditization and what you can do to ensure your brand doesn't get lost in the shuffle.
Read the Transcript
*This transcript has been edited and formatted for readability.
The Rise of Commoditization
Chris Wilks: All right guys, let's dive in. It seems like today that commoditization is happening at a pretty rapid pace, so what's behind the rise of commoditization?
Bo Bothe: Well, when we were prepping about this and we were all talking about it, one of the things that we've seen is that technology – on top of the transfer of information, on top of just our human capacity to take advantage of these opportunities – seems to all be catching up to itself. I think that's creating a pretty interesting position for a lot of companies. One where we can get really good stuff a lot faster and find it easier. That makes it really hard for different companies, brands, products to stand out on their own.
Chris: Yeah. And it feels like technology is kind of the catalyst for why commoditization has jumped up at a rapid pace. Jonathan, how has the advent of the internet facilitated more commoditization?
Jonathan Fisher: First, on a global scale, you can now get products from anywhere around the world, right? Which maybe before, you only had two or three competitors in your backyard – and now you've got 50 at your disposal.
Secondly, you've got transparency. It's much easier to price shop, compare reviews, performance, things like that and to uncover any issues, recalls or whatever is out there than ever before. That continues to grow and scale and compound as that data is out there.
And on top of that, you've got things like aggregators. People that are scraping data and putting it together and offering you that commoditization out of the gate, be it airlines, hotels, whatever it might be. So I think all those factors are really driving and accelerating commoditization.
How Brands Can Combat Commoditization
Chris: So how do we, as brands, keep from falling victim to commoditization? How do we keep ourselves ahead of the game, ahead of those that would love to see us be all commodities?
Consider the Brand Experience
Leslie Rainwater: I think one of the things that we need to do is go a little bit above our product and look more into what it is we offer and what we're giving our customers as an experience. It's very easy to go down into product marketing and really focus on our product or service but to take that picture up a level and start encapsulating what the experience is around it.
A good example: LaCroix. They sell water, right? You know, that's a product everybody in the world sells, but they sell experience, they sell lifestyle, they sell essence. So I'm going to go to the store and I'm going to buy that life experience even though it drinks the same as the one that's much cheaper. But that's what I'm really going after is how it connects to me emotionally.
Bo: Right, it's semi-tasteless, fizzy water in a can, but what makes you want LaCroix vs Perrier vs a store-bought generic brand is how they tap into what the audience wants. It's not just the experience they have with the product, but the experience they want to share with others, I think is a big part of that.
What Leslie's kind of tapping into here is that it's really important to understand that consumer in a way – and I think it's getting better and easier with personalization, customization, the way we can share information to understand the consumer – so that brands can adjust their messaging when it's true to them.
If LaCroix didn't really care about anything they talked about, then it would ring false. And that's something that people are going to have to be more and more worried about as things start moving faster and the marketers try and keep up with this.
Go Beyond Features and Functions
Jonathan: Yeah. I mean it's not about the features and functions anymore. We talk a lot about those as 'F' words. That's dragging you down into that tactical real estate of the conversation. So you have to look at what the customer journey looks like? What does that customer experience look like? What are their promises and pledges that the brand stands for? Like affinity marketing, what causes are they associating themselves with these days? So you start to find ways to differentiate through those experiences.
Selling More Than a Product
Bo: Right. And it's been interesting to watch companies like Toms and Warby Parker and the social good that they've tried to build the company around, but at some point, the product has to work for the customer too. I mean, you're not just going to buy a pair of shoes that aren't comfortable so that somebody somewhere else in the world has a comfortable pair of shoes. And so aligning from an affinity standpoint, aligning those things is important.
It was really interesting when I started my career as a designer, we would do package design and we'd stand across the room and we'd hold up the bottles of beer that we'd comped up by our chest. And I was a young designer, figuring it out, and I was like, "Why are we doing that? Why are you looking at it like that?"
It was like, "Man, haven't you noticed at bars, people wear these things like badges?" You know, you're an off-brand, you're a light drinker, you're a craft beer person. But whatever it is people carry their bottles up. They don't really stick their finger in it and carry it down below, they carry it up by their chest like it's a logo on their chest.
And that same thing rings true here. How do you associate with the brand and how does your customer associate with your brand? And I think that was something that as Jonathan and I formed the company and as we've grown, we're seeing brands and products commoditize.
I mean, beer is a commodity. It all pretty much tastes the same except for the hoppy ones or the this or that, right? But the main thing there is that I associate with it. I associate with a certain type, and I want you to associate my brand with that.
Chris: Yeah, I think that's an important point. I remember a lesson that I had in college from a professor where we broke down the Harley Davidson brand. And it was like there are people who sell bikes, but Harley Davidson sells a lifestyle.
Some people are like "Oh, I drive a Harley or I ride a Harley." There's weight in that. It means something. There's a perceived image that you want to portray. So really, especially on the B2C side, one of the ways to avoid being a commodity is to sell more than just a product or a service. You sell an image or a mindset, right?
Bo: Or you sell efficiency or you sell, "I'm the smartest engineer, and so I work with the smartest engineering company." Back to the B2B side.
How Brands Are Combatting Commoditization
Chris: So we were talking about how to not become a commodity or how to kind of rise above commoditization. I heard two different things. There's an internal component and an external component.
One of those internal components for brands is doing social good. Is that something that we're going to continue to see more of? Because it seems like a lot of brands – at least visible brands – are aligning with certain causes these days. Is that something we foresee in the future? Is that going to continue to differentiate you amongst other competitors?
Jonathan: I think so. I mean, from a recruiting standpoint, employees are going to want to go work for companies that they share similar philosophies with. Be it the environment, geopolitical, healthcare issues, generational issues – like baby boomers getting older, etc. So you look for organizations that are a good fit for you. And part of that is their causes and how they give back and do community good. So from a recruiting standpoint, I think that's one factor.
And from a capital standpoint, we're seeing now that investors are looking for sustainability. So, call it your cause or call it your philanthropic venture, I mean, you still need to figure out your sustainability strategies. And then generally, consumers align with those sustainability strategies. So I think that's driving a little bit of it as well in that.
And I think the sustainability reports now are kind of the new version of the annual report. It seems to have supplanted that in its prestige and recognition and awareness.
Chris: Yeah, I think it's being driven by the younger generations and their efforts to be "woke." Bo, you gave the example of Toms and people supporting them because they do good or they're wearing Allbirds or, people can look at that and say, "Oh well he cares," right? So that says something about you as a consumer. And I think that's, and we've touched on it, that's a way to rise above commoditization.
Jonathan: Yeah, I know my family, in particular, makes decisions on purchasing based on their environmental alignment, philanthropic alignment, their sustainability alignment. Both from a purchasing standpoint and from an investment standpoint. So we're looking at it from a capital investment, we're looking at it from, you know, a lifestyle investment, on both sides of the fence.
The Role of Brand Experience
Chris: Okay. Well, we've talked about brand experience being important to rising above commoditization. What about that experience? Does it need to be the best, number one, top tier experience? Because it seems as though there's only one place at the top for any industry, right? There can only be one 'best experience'. So is it just give the best experience possible or is it consistency?
Leslie: I'm not sure best experience would describe it because I think experience is so individualized, so it really is the thing that fits best for me. And I think that's, again, knowing who your customer is and who are the people that you want to connect with. What do they need and what is it that we can offer? And so for them, it might be the best experience, where for somebody else, you know, we may not be a fit. So it's really focusing on and defining what that experience is.
Bo: Right. I mean, I think there's experience with the product, right? Does it delight me? Does it get me excited? And in some cases, you know, toilet paper doesn't get me excited but I need it to be comfortable and I need it to work, right?
One of our clients kind of falls along that line. One of their three key strategies is to delight the customer. So we've had a lot of discussion with them about to what expense. And I think companies have to also align their brand vision, their expectation of trying to separate from commoditization with what they can actually afford to spend to create an experience that makes sense.
So if I'm selling construction trailers, I don't want those to be as posh and as awesome as the nicest house you could live in, but I do want them to work and function. So delighting the customer is different to them.
To Leslie's point, there's the overall delighting the customer or meeting the customer's needs at a high level in the industry you're in, and then there's the personal expectation, which is, I think, how you separate yourself from a commodity product or a commoditizing brand. That's where you actually deliver what they expect at a slightly higher level that separates you. And it doesn't have to be a thousand times better. One time or two times better is okay.
Jonathan: Certain clients are going to have different expectations along the life cycle of the engagement. We have a client, for example, whose buyers are very focused on their pre-planning stages, not so much their delivery stages. Delivery stages to them are kind of equal across the board.
Other clients that we've seen might be into the return policies. We had a client who's in an industry that was notorious for bait-and-switch tactics. And so the experience that we could differentiate was the fact that 1) you would never get the wrong product and 2), if you ever did, we made that exchange, within the return policy, amazing. We would pay for their technician to go out and replace it, whereas the other competitors wouldn't.
So you start to look at where you can differentiate along the value chain before an engagement, during an engagement, after an engagement, building re-engagement. From there you can start to figure out where you can differentiate and position so that you don't feel commoditized. But it takes a conscious effort to really look at those customer journeys, to understand, to Leslie's point, what's relevant for that buyer and that buyer segment that you're engaging with.
Executive management might care more about the purchasing processes and the billing processes and the financial processes. Whereas the operations people may care more about the tactical operational engagement – how you're delivering reporting, how easy is it to be responsive in the field when issues come up. So you have to look across the food chain.
Final Advice to Avoid Commoditization
Chris: Yeah. So this is all really great stuff. But to end the episode, I'm actually going to put you guys on the spot a little bit. If you guys could impart one tip or one thing that brands out there could benefit from. If there's one thing you could do to avoid your brand, becoming a commodity, what would you prioritize? What would you put first?
Jonathan: I would think it's making sure you really understand the position you want to own and how it's differentiated from your competitor. That's number one.
As part of that process, you really need to look at that value chain as a model and where you can differentiate along that model. So for me, I think when you don't take that time to understand that differentiation in the marketplace where everybody is already established, and you don't make a conscious effort to really single out the place you want to be, and you don't understand your relevancy along that track, I think that's where companies make the biggest mistake.
Chris: Okay. Bo, do you have anything?
Bo: Yeah. I think being true to what you believe. So if you find some key differentiators that make you different, but some of them may not be something you want to stand behind or stand for, how do you stay true to what you believe your brand promises? How do you keep that consistent and make sure it's authentic?
So understanding where in the process you can differentiate, understanding what's important to the way you deliver your product and what you want people to think about you, would be kind of one of the key things that would be important to make sure you don't commoditize.
Chris: Excellent. Leslie?
Leslie: And I think along that line, it's really understanding what your value proposition is. What is it I bring and truly can offer? And it's more than just competitors. You're benchmarking against yourself at that point. And it could be something that customers don't even know they need yet.
So it's always looking at that through more of a creative lens, but being very articulate and very purposeful about understanding that and then building your marketing efforts and your business and your strategy around that. So that kind of dovetails a little bit with what Bo was saying.
Chris: Great. All right guys. Well I think that about does it for this episode, so thank you for your time. I really appreciate it and we'll see you next time.