How To Get More Business And Command Top Dollars By Avoiding Commoditization

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