Differentiation is critical for commodities to achieve any marketing advantage. With few exceptions, such as monopolies like the cable companies and one-of-a-kind products like Polaroid was years ago, differentiation is critical to creating a preference or commanding a premium price. If your product or service is not differentiated, there is no reason to choose yours over others, and you will wind up competing on price.
The good news is that there are many ways to differentiate commodity products and services. I used to be in the business of selling flour, shipped by trainloads from the Midwest to large, commercial bakeries on the East Coast. Trains can get delayed for a variety of reasons, so the bakeries needed to build expensive flour storage facilities on their premises for back-up. We built our own flour storage facilities in locations from which we could reach the bakeries by truck within a few hours. This gave the bakeries an assured supply on demand, and it eliminated the necessity of tying up their capital by building storage facilities. In this way, we created a preference and price advantage for our commodity.
There are many other ways to differentiate commodity, such as:
- Risk – eliminate or reduce your customers’ potential risks.
- Inventory – offer inventory management or convenience.
- Financing – develop customer financing options, appeals and incentives.
- Rewards – consider a rewards program to encourage loyalty.
- Sustainability – appeals to customers, employees and communities.
- Packaging – use packaging for convenience, or badging, to stand behind your commodity.
- Ingredient – create a proprietary ingredient or concept available only in your commodity.
- Bundle – or unbundle, your products and services.
- Segment – your market, and tailor your marketing to the most profitable segments.
- Experience – provide a superior purchase or usage experience: easier, faster, more flexible.
- Consulting – become an expert in your customers’ industry and become a valued authority.
- Facilities – showcase impressive facilities, operations and equipment as sales tools.
- Safety – commitment to the health and safety of yours and your customers’ workforce.
- Marketing – create appealing marketing materials and concepts.
- Brand Strategy – build and support a compelling identity, story or promise.
Let’s talk about Brand Strategy: Gasoline is a commodity that relies on differentiated brand strategies. These strategies usually involve ingredient branding: Shell NiTRO gasoline (to protect your engine); Exxon/Mobil Synergy gasoline (Better for the environment); Chevron “With Techron” gasoline (to maximize your mileage).
Some of the most successful brand strategies have been created to differentiate a commodity. Think about Morton’s Salt, Gold Medal Flour, C&H Sugar, Sunkist Oranges. Water, once the ultimate commodity, is now a range of differentiated products aimed at different market segments and desires. Water is differentiated by its source (Fiji, Lake Geneva, Glacial Iceland, Artesian Springs) or by its character (Vitamin Water, Mineral Water, Smart Water).
With a clear brand strategy, good market data, strategic naming and design, creative communications, and resources aligned to support your goals, you can differentiate any commodity to create a preference or command a premium.