This is something I didn’t include in my eBook “Lightworker’s Guide to Self-Employment” because it’s more about business improvement than startup. If you are in business, it’s critical you differentiate your offers. This way, you get more business even in a bad economy and can ask for higher prices, increasing your profit and therefore enabling your to improve your offers even further.
And the key is to think as a fellow human of your customers. (Photo credit)
What is commoditization?
First, the definition. Wikipedia says:
Commoditization is the process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers. It is the movement of a market from differentiated to undifferentiated price competition and from monopolistic to perfect competition.
This is a natural flow. Something unique comes to market. Everyone is excited and willing to pay premium price. They even line up and get on the waiting list. Soon, others copy it, letting people start comparison shop. Merchants whose only sales pitch is to lower price go ahead and lower their price. Others follow.
Our challenge as business owners is how to keep providing additional value so that people seek us out, happy to pay extra. This divides the market to two: One is the commoditized offers and the other is the unique special offers. This way, consumers can choose which depending on their value system.
You may be thinking, “Boy, that sounds good, but I have no idea how to do it. It sounds difficult.” Sure is. Avoiding commoditization takes the heart and the brain. This is why it gets rewarded well. So you have a choice. (You know I am big on free will and free choice.) You can take the easy route and work like crazy or you can think, change the way you do business, and be well rewarded.
Avoiding commoditization helps consumers, too
Please understand this approach is beneficial for consumers, too. “Perfect competition” sounds nice, but what results is a boring world of lookalike commodities. Further, it causes quality compromise because, after cutting a big portion of profit margin, it’s the only way to keep the low price. Do you really want to live in a world where only cheap boring low-quality stuffs are available?
If you love and care what you do, taking the time and effort to think how you can add unique value to your offer is worthwhile. Your spiritual commitment helps you.
5 approaches to counter-commoditize your business
Where in the commoditization process is your business in? Are you virtually free from competition? Are you in severe price war against your competitors? Somewhere in the middle?
Here are five approaches, or hints, to counter-commoditize your business:
1. Be the authority in your field
Learn your trade really well. Invest in your education. And establish yourself as the authority in your field by publishing books or speaking in public. Your authority status becomes the special value to your customers. For example, there are people who seek out the life coach they saw on the media rather than hiring any coach who advertise on the paper.
2. Educate your customers
While you yourself get educated further about your trade, educate your customers. For instance, if I were to sell soaps, one of the most commoditized products, I will make a presentation about the various ingredients that go into a soap, how each influences your skin, the negative effects of the additives commonly used in supermarket soaps on you and the environment, how mass production and old fashioned soap making are different, etc. Then I will sell soaps made in the old fashioned way with only good ingredients at premium price. The education and the proof of quality of the soap that satisfies such educated customers are the additional values in this case.
3. Personalize the service
Make your product or service one of a kind by adding personalization. I once saw an artist who paints rockstar portraits on the LP records. People buy their favorite artists’ portrait for their nostalgia. This is quite unique already, but what if the picture came with a line of your favorite lyrics and your name? Adding this doesn’t take much time for the painter, but means a lot for the customer. Would they pay a good amount for this extra feature? I think so.
4. Narrow down your target market
This may sound so counter-intuitive. You might say,”Narrow down the target market? You must be joking. I want more customers. ANY customers.” The fact is you might get more customers by tightly defining your target market and changing aspects of your business to deliver specific value this target market want.
As an example, I’m thinking of car mechanics. Even today, many women feel uncomfortable going to car mechanics. All the places I know are so male-oriented even though close to half the car owners are women. I would pay some extra and drive at least 10 extra miles to go to a garage where I feel more comfortable.
It doesn’t mean there has to be a female at the store although that may be helpful. It definitely doesn’t mean the servicemen have to wear pink. How about making the waiting area more female friendly and pleasant to sit? Offering additional service such as car wash might help, too, because a lot of women just don’t like going to places that has anything to do with car care. It saves their time, too.
I don’t have kids, but if I do, I’d be so pleased to find some kid-friendliness, too. I’m sure McDonald’s gets extra business for their play area (not for better taste over other burger chains).
This doesn’t mean you reject customers who don’t match the description of your target market. Using the same example, I think men would love the kid-friendly features just as much.
There are many ways to use this approach. Target the long tail. This may also make you the first or best known authority in this tightly defined market.
5. Get empowered by synergy
You can offer additional value by teaming up with other businesses. The key is to come up with a winning combination.
Hmm, I’m still thinking about car care. Offering additional service of car wash is a kind of synergy already, but what if the garage had a drive-up coffee shop on their premise? The customers can sip fresh brewed coffee while waiting for their cars to be serviced. It’s not just any old car place, it’s a gathering place for car owners!
And all the customers of the coffee place inevitably see the repair shop, so next time they need a service (notice they all have cars to drive up) they might just come to this one. This is synergy, helping both businesses and delivering additional value to customers.
Adding entertainment or comfort factor is an easy way of synergy. This is why restaurants host live music. It’s not just somewhere to eat, you get to hear music at that restaurant! Well, having music is getting common, how about having a magician go around the table on weekend nights? (A lot of amateur magicians would love that kind of part-time opportunity.)
This is in no way the comprehensive list of ways to avoid commoditization. What other ways can you add unique value to your business? Think from the perspective of a consumer. What do you wish to see in the market? What additional service or products make life easier and better?
Related post: Another example to counter commoditization by Seth Godin
I like Seth Godin. Although he is considered a marketing guy (maybe I should say The Marketing Guy), I think he is a lot more than that. His blog brings daily inspirations for me about life and people. His latest book Tribes: We Need You to Lead Us is also a lot more than just about business.
The difference between leadership and management
Even though leadership and management are usually used synonymously, Seth Godin defines them differently.
A manager is appointed by the “king” of the organization. Their job is to keep the status quo of the organization according to the rules. No matter how they sugarcoat it, managers are fundamentally against change. In other words, their change has to be approved by the king and has to happen according to the rules.
A leader, on the other hand, is anyone who steps forward with an idea. The idea doesn’t even have to be the leader’s original. (Muhammad Yunus wasn’t the first person to do microfinancing and Al Gore didn’t discover global warming.) The important point is that a leader takes the initiative to make the idea happen. A leader is all about change.
Are you a manager or a leader? Or neither? This defines your basic driving force in life. And how you relate to others.
A manager and the people who are managed live from fear. Because they are against the natural flow of life, the change. A manager’s job is to get as much work done by the employees as possible at the lowest cost. Managers push and then exploit.
A leader and their tribe members, on the other hand, are inspired with love, the passion to make something happen that was not before. A leader leads with their message and also offers a platform for tribe members to communicate with one another. Leaders give.
The internet and social media are just tools
Seth Godin emphasizes that forming a tribe is not about getting as many people as possible to sign up for, say, their Twitter or newsletter. The internet and its various social media tools have made it possible to form tribes across the globe, offering cheap (often free) and fast ways to communicate, but they are just tools. It takes a leader to utilize them.
And it’s not a number game. A large number of people is not necessarily a tribe. A tribe is a group that are united by common vision, a group of active members who connects with the leader and other tribe members. When this criteria is met, yes, a bigger tribe means more powerful tribe, but quality comes before quantity. Seth Godin even recommends tightening the tribe as a way to stay meaningful.
My takeaway of the book
This book made me think. In fact, I’ve been thinking and I haven’t come to a neat conclusion yet. I know there is something in me that wants to come out, some messages that I really think important for many people. This is why I write on this Yes to Me blog. I write about a lot of things in life. But what is my core message? In other words, what kind of movement am I trying to form?
I have messages — like, lightworkers can be successful entrepreneurs (please check my free eBook) and we can defy aging. I have a vision of the New World. But I still think there is something more. Or maybe I want to put something in a more actionable movement. . .
I hope you start thinking about these things, too, about your own life. I mean, if you don’t want to live as a manager or their herds. If you want to stop “sheepwalking” (this is the term Seth Godin uses. I call the same mentality “slave mentality” I guess I may be a bit harsh. . .)
We have the power to create our lives and this world. The most important question is: WHAT do you want to create? What do you want to change?
Here is Seth Godin talking at TED about tribes (HT: Marelisa Fabrega):
It’s 18 minute video, but trust me, it’s worth it, and you’ll have some good laughs, too.
Are you leading a tribe? Are you a member of tribes? I’d love to hear from you — please leave a comment.
I am resuming the Interview With Successful Entrepreneurs series. I haven’t been writing about entrepreneurship for a while, but it’s something very close to my heart. Entrepreneurship is empowering. It’s about believing in yourself and your idea and taking the initiative to bring it to the world. (Photo by leefotos)
Today’s guest is Steve at My Wife Quit Her Job. His blog is full of practical advice. I am very interested in what he has to say because his business is about selling stuffs, not service. So far, we’ve had only one guest (Susanna Ordway, who sells her handmade jewelry) who is in product-based business. All others are in service business, and I myself am in service business.
I guess product-based business has a set of unique challenges, such as managing logistics and inventory. To me, it sounds so difficult.
So please welcome Steve.
1. Tell us a bit about your business and why you started it.
When my wife and I first got engaged, she laid down the terms up front that she was going to become a housewife and quit her job as soon as we had our first child. This was something that I had no problem with since I strongly believe in having a parent stay at home with a child especially during the early years.
But when my wife became pregnant with our first child, we faced a huge dilemma. With mounting bills to pay and a child right around the corner, we would be taking a 50% hit on our total household income during a period of time in which our expenses would increase dramatically.
Since my wife was not going to work and we needed the money, we decided to create an online business selling wedding linens to offset her lost income and thus Bumblebee Linens was born.
We chose the wedding industry because my wife and I thoroughly enjoyed planning our own wedding and wanted to help others do the same. If you are interested in how we stumbled upon on our store idea, you can read more about How We Found Our Niche For Our Online Store for more details.
2. What were the three biggest challenges when you were starting off as a new entrepreneur?
I would say that most of our challenges were mental. Getting the online store website up was relatively easy. But working out the logistics and getting customers in the door was the hard part. In fact, there was a point after we launched our online store in which we had no business for many weeks and we almost decided to call it quits. It’s difficult to narrow down the biggest challenges down to three but I would say that the following were the largest obstacles.
- It was extremely hard for us to find the time and motivation to actually work on the business. Both my wife and I had full time jobs at the time and we were always extremely tired after coming home from work. In fact, working on the business was probably the last thing on our minds at the end of the day. It also didn’t help that my wife and I are lazy at heart and like to relax in front of the TV
- It was also really hard for us take action early on because we knew absolutely nothing. We had no idea what the hell we were doing. I didn’t know a single thing about websites or web programming. My wife didn’t know anything about how to run an online store. What ended up happening was that we got stuck in this loop of doing research instead of taking action because we were afraid of doing something wrong.
- When we finally got some momentum going, we found that there was an enormous amount of information that we had to digest and learn in order to open our online store and we constantly burned ourselves out while trying to cram it all in. The problem was that we wanted to get our online store up and profitable as quickly as possible so we often worked late hours to try and jam everything in. All of these late nights took a huge toll on our psyche and our morale. Then, when we finally opened our online store to zero customers, our excitement and hopes turned into despair.
3. And how did you work through these challenges?
Finding the time and motivation was probably the hardest obstacle to overcome. Our minds were always motivated but somehow we could never find time in our schedules to work on the business early on.
Starting a business is hard work and requires constant, steady progress. Steady being the key word, my wife and I overcame this barrier by dropping certain activities and setting aside specific times and days during the work week to work on the business. By setting aside and scheduling “business” time, we eventually started making progress towards our goals.
The “knowing nothing” aspect of our business was very frustrating as well. We kept second guessing ourselves and early on, we had a bad case of analysis paralysis. Ultimately, we overcame this by just putting our foot down and telling ourselves “Screw it! Let’s just launch the business and figure things out as they come”. Turned out to be a wise decision because in the end we came across problems and issues that we would never have been able to predict ahead of time. For example, we were completely wrong in terms of what we predicted would be our best selling products.
Once we got going, my wife and I kept burning ourselves out. For example, I stopped exercising, stopped eating, stopped sleeping and focused all of my time on the business. It took us a while but after getting sick multiple times, we finally discovered a proper balance between work and play. It’s easy to get caught up with your business early on, but it’s important to find the time for a break as well. Ironically, taking time away from the business allows you to be more productive.
4. What is the best part of being an entrepreneur for you?
The best part of being an entrepreneur is the ability to set your own schedules. These days, my wife stays at home with our daughter full time and works on the business when our daughter takes naps. There’s no way that you could do this with a full time day job.
In addition, I like feeling in control over my own destiny. Running a business is hard work, but it’s worth it knowing that you get to call all of the shots.
5. Any advice for people who dream to have their own business and yet find it hard to make the leap?
My advice is to set aside at least one day of the week to think about and brainstorm business ideas. Once you have a few ideas in mind, you then need to find that magical trigger that will motivate you to follow through with your plan. Why do you want to have a business? Are you really serious about it?
Our trigger was obviously our first child. We desperately needed to find another money source to replace my wife’s lost income. In fact, our desperation was probably the single most important reason why we were successful with our online store.
Motivation will provide you with persistence and mental strength when things go wrong. Motivation will provide you with the necessary energy to succeed. I strongly believe that if you are properly motivated that everything will work itself out. Everyone has their own “Go” button. You just need to find yours.
Regarding the product-based business aspect, my wife and I had no prior experience in managing logistics, importing goods or managing inventory. We basically learned through trial and error and getting advice from friends who run brick and mortar stores. My advice to people in the product business is to find a friend or mentor that you can consult with early on so you don’t get bogged down with stupid mistakes.
I love their “Just do it” attitude. As he says, we could be caught up in the analysis paralysis forever. And that doesn’t get you anywhere nor make money. Taking actions empowers you. And I agree that there are problems you get to learn only after you start — even if your pre-launch research is extensive.
I checked their online store and it’s beautiful and easy to navigate. It even has some fun craft ideas, so even if you are not getting married, you might enjoy checking it out ^_^
Are you interested in starting your own business? Not just as a way to pay bills but as a way to bring more meaning, passion, and fulfillment to your life? Check out my (free) eBook, too!