I see this all the time in commodity-type industries.
I call it a commodity-type industry because those businesses provide products, services or solutions that do not have a value-add, above-and-beyond the core products, services or solutions.
The customer is simply paying for a non-creative output.
A commodity could be defined as:
“A basic products, service or solution that is undifferentiated that it is and can be interchangeable with other products, service or solution of the same type.”
Emotional value as opposed to function value is what separates a brand from a commodity.
If you expand the emotional value, you can broaden the price.
I have discussed this in depth here.
Other examples of commodity-type industries could be:
- Tradies;
- Chippies;
- Labourers;
- Painters;
- Etc.
The commodity issue that affects their marketing and sales is the exact same issue with promotion between affiliates – it’s really hard to differentiate one affiliate to another.
In other words if a company has 10 affiliate to sell the product, those 10 affiliates are all selling the same product for the same price and if they overlap in prospects, it’s really hard for them to be better than the other competing affiliate.
I have written about affiliates in depth here.
A great example is Uber’s refer a friend incentive, in what they call “Free Rides”.
Uber offers users a $5 discount if they refer a friend.
The friend also gets a $5 discount.
The problem is this offer is available to all current users and all prospective users.
Any prospective user can take advantage of the $5 discount from any number of users they know.
Which one do they choose?
Usually it’s the one that is front of mind when making a purchasing decision.
This is the reason why advertising or constant marketing and sales communication works.
You, as a brand, have no idea where a prospect is at metaphorically or when a need arises, so using advertising or constant marketing and sales communication helps you catch prospects and customers at the right time for them.
You, as a brand need to be different.
Customers want your product, service or solution to work.
The product, service or solution working alone is not a differentiator, it’s a bare minimum.
It needs to work!
That’s why customers purchase.
In the case of a Sparkie, the product, service or solution has to adhere to the electrical code etc.
Again, it’s a bare minimum.
Any one qualified (and there are lots of them,) could deliver the product, service or solution.
There is not real value add in-and-of-itself.
Most of these commodity-type industries market and sell the same product, service or solution.
They pitch their services the same.
But there is nothing different about them compared to their competition.
So, how do commodity-type industry businesses compete?
AKA generate leads and prospect.
They compete on price.
When businesses compete on price and discounting, they drive the market down.
Customer gets accustomed to lower prices and the process is irreversible.
It eats away at your margins meaning you need to sell more to make the same revenue.
And competing on price is a race to the bottom.
NO!
Don’t compete on price.
Don’t compete for new business based on your commodity product, service or solution alone.
Beyond these two, here are some market-proven ideas (not an exhaustive list) to help your commodity business compete:
- Brand: Create a premium brand;
- Free and Offers: What can you offer prospects for free or $1 that will qualify them as a prospect or customer to push them into your marketing and sales pipeline and marketing and sales communication sequence?;
- Have a pipeline and communication schedule and content. This allows you to communicate with new prospects on an ongoing basis to sell them at the time of need;
- Bonuses: This is related to Free and Low Priced Offers. I always suggest affiliates (as discussed previously in this guide), to differentiate themselves by creating a value add by way of a bonus above-and-beyond the core product, service or solution. A great bonus is something cheap, high perceived value to the prospect and scalable in its delivery. Usually digital products are great for this. The product is the commodity, but the bonus is the differentiator;
- Partnerships: Customers with the same pains or same wanted gains actually buy more than one product, service or solution (even competing products, services or solutions) to bring them closer to that gain or away from that pain. Customers were going to buy those products, services and solutions anyway, with or without prompting from symbiotic marketing. How many books of the same genre do you own? I’m willing to guess that it’s more than one. So, case in point 🙂 Another example may be hair shampoo and conditioner. A better example may be hair shampoo and a hair straightener. In the latter example, the products, services or solutions are either upstream or downstream from each other. Upstream is better than downstream because your products, services and solutions are the next logical progression for the customer who has purchased a competing product, service or solution. Products, services or solutions that are alternative or competing can also be complimentary to your product, service or solution (in the case of hair shampoo and conditioner). Embracing this dynamic puts you in a position of leverage – partners invest money, time and effort in generating leads and partners both leverage each other’s investment. Put this way, if a partner has a qualified contact list that has purchased $1,000,000 of products, services or solutions and you can leverage this to build your contact list, you have in effect gained access to $1,000,000 of qualified customers. Pretty powerful;
- Advertisements: search engine ads not social medial ads, for the reasons outline previously in this guide;
- Search Engine Optimization: where do most people go when looking for a commodity product without having a referral? Google. The search for the suburb and service. You want to make sure your business is in the first position; and
- Use and incentivise referrals with evangelists: You have already made a promise, delivered on that promise and created trust (especially important in industries where there are charlatans and swindlers), so you now have a great basis for word-of-mouth.
Once you have differentiated yourself on the front end in how you market and sell, you also need to differentiate yourself on the back end in how you increase customer loyalty.