Defeating Commoditization

Bob Schultek

Bob Schultek

Tom was concerned that his business was becoming increasingly commoditized. More and more often, his customers were specifying what they wanted, as if they were reading from a product bulletin. Tom’s sales team was generating quotes in response to these requests. There was little dialogue with the customer beyond responding with price and delivery, or reacting to some competitor’s quote.

I asked Tom:

“What makes your business unique…what offering do you own?  Why do your customers choose you rather than your competitors?”

To defeat commoditization, to avoid playing that game, Tom’s company must gain preference with his customers.  Becoming “preferred” requires that Tom’s business produce more quantifiable value for his customers than they can get from some other supplier.  He must help them make money.

Which customers do you prefer to serve?  To discover what makes your business distinctive, begin by defining the type of customer that is most valuable to you.  Who is the target customer for your products or services…who is your core customer?  Envision the key characteristics that define that customer.  Who buys from you frequently enough and in the amounts required to maximize your profitability?

You will make money when you help your core customers make money.  How can you do this without engaging them to learn why they buy from you?  How are your products or services producing value for them…helping them make money?  This is the essence of your distinctiveness…the unique value you own and use to produce value for your core customers.

You don’t have to act like a commodity.  Customers now have many options to fill their needs.  Treating every possible supplier like a commodity makes it easy and quick for them to evaluate those options.  If you only respond to their “request-for-quote” questions, without seeking to learn more about their business and goals, you will be acting like the commodity business they expected.  You lose the opportunity to be different…to become preferred.

Tom’s business will break free of commoditization and earn a preferred position with his core customers by learning their goals and needs, and helping them make money.  The customer will notice the difference compared with others who act like commodity suppliers that don’t care enough to ask.

Who are your core customers?

How do your products/services help them grow and make money?