Each sector has products or services which are commodities. From food and beverage products to household goods and everyday uses, commodities are everywhere, making it increasingly difficult to profit because consumers tend to view standard products or services with ambivalent attitudes.
Indeed, in customers’ minds, the product or service meets the same need regardless of the company or organization providing it, so paying extra for that product or service is frivolous and unnecessary if another company has it for offers much less than yours.
Whether it’s water, the service is an oil change, or the product is streaming TV shows and movies, customers instinctively believe more and more each year that every business or its direct competitor is offering an interchangeable experience.
The solution to this hurdle is to continually downgrade your products and services to remain unique in any business line in your organization. But how does a company succeed in this?
De-Commoditizing Adds Value
Take the concept of making and selling a can opener. Right from the start, the average customer who buys one from a store will blindly select a can opener, knowing they’re all the same. But what if your can opener is designed to clamp the can shut without having to squeeze to cut through the top of the can? This enables you to increase the price of the product. From there, your team of engineers can add more unique aspects to your can opener’s function, like a more comfortable grip or a better gear system to make the opener more comfortable to use.
The process of downgrading your product or service adds intrinsic value to something typically locked in a saturated market paradigm. Another more world-famous example dating back decades is the ongoing de-commoditization of water.
Water is the commodity of the earth; But once you’ve bottled water, you can now charge for it. Then if you take that water and put it in a fancier bottle with an eye-catching logo and add a hint of fruit flavor or vitamins, the price increase is now justifiable. A commodity has been de-commodified with straightforward modifications.
Any product and service can be downgraded repeatedly, but the sad reality is that most businesses avoid or choose not to. Instead, they develop a new product or service and milk it, turning the product or service into a commodity and further saturating the market.
As I have repeated time and time, resting on its laurels is the antithesis of my Anticipatory Organization Model®, which allows you to anticipate disruptions and changes and turn them into opportunities and benefits. De-commodification of your products and services is an integral part of this model, and here’s why.
As soon as you develop a potentially disruptive new product or service, a competitor will undoubtedly copy it. When they do, your de-commodified and innovative product or service gradually becomes a commodity, and as margins thin over time, you may end up being disrupted by your innovation! Most companies are competing on the price they have come up with and ultimately choose to remove the product or service out of their line.
An Anticipatory Solution Using Trends
A more efficient approach to this process is to think creatively about your product or service before the margins thin as you cruise the waves to shore. This allows you to be efficient and useful with the innovation of new products and services and the reinvention of old products and services. You can repackage it, redefine it, reorganize it, or make it unique on the market again.
By paying attention to both the alarming trends shaping your industry and the soft trends you can influence in your favor, you can predict where your industry or your customers will be for years to come, as well as what they will want. This can then be exploited to de-commodify products or services before returning to square one and interrupt you by reducing margins beyond salvation.
What future trends can you identify based on the direction of change you can see?
Shampoo, for example, is arguably a commodity in our modern society and has had seemingly endless brands and formulas in an attempt to downgrade it. More recently, chemicals such as sulfates and parabens commonly used in shampoos and even some conditioners have been found to cause damage to hair follicles.
This, coupled with consumers’ passion and interest in healthy and natural options and their physical well-being, has led Johnson & Johnson to be the first of many companies to remove all the harmful chemicals we had never considered until now. Still, that industry nevertheless once again it is ripe for de-commodification.