If you think about it, most of the products in the marketplace are commodities, products which are pretty much like all the other products in that market space.
That means, of course, that most marketing people have the unenviable job of differentiating where there is, in fact, very little difference.
Marketing a commodity generally falls into one of four broad categories:
? Personalized value, at the margins.
The classic example of this is toilet paper. We all use it, though it is not a subject most of us spend a lot of time thinking about. So how do marketers get us to buy one brand and not another? Well, one brand says its product makes you feel cleaner. Another tells you that it is gentler on your posterior. And a third says it is more absorbent.
This personalizes the product, suggesting that it is perfect for you. It speaks to the unexpressed good that the customer wants, and it speaks to him through a very personal good. Having spoken directly to something the consumer values, even if he doesn’t talk about it, brand loyalty is developed; and that brand loyalty makes the commodity product less subject to price competition (within reason, of course).
? Price competition
The “buy my product because it is cheaper” approach is a dangerous one. Someone can always beat your price.
The automobile insurance companies have been doing this for close to a decade. Geico set out to buy market share. And when it added live customer service in addition to on-line customer service, the war really got started.
Interestingly, most of Geico’s competitors made no serious attempt to differentiate by service, product offerings, or reputation. They accepted price as the competitive arena, and accepted the commoditization of their products and business. It has reached the point now that one company even bases its ads on the stated position that auto insurance companies all offer the same products, quality, and service – but they are cheaper. Other companies, however, have given up on price competition as a strategy and have switched to the personalized value at the margins model with “disappearing deductibles” and “better car replacement.”
Competition by price reinforces the view that what you are offering is a commodity. There are no meaningful differences among the companies competing for your business. So brand loyalty is not an issue. There is none.
? The “nostalgia” approach
This approach relies on inherited brand loyalty. This is the product you grew up with as a kid, and this long-established brand defines the product category for you.
We all have products like that, subliminally creating a “warm and fuzzy” feeling. This approach usually works best in the food category. Think of how Hellman’s mayonnaise defines itself as “real” mayonnaise. Think of how Heinz ketchup continues to dominate in that space.
? Reinvent, rebrand, and reposition
This approach is exemplified by the pharmaceutical industry.
If you look at the over-the-counter drug offerings in any supermarket or drug store, your eyes have a tendency to glaze over. Each section offers dozens of choices; and, if you read the labels, you’ll find that most of the competing products have pretty much the same formulation of the same generic (non-proprietary) ingredients.
Obviously, the drug companies invest heavily in brand advertising. But they also do something else that is very clever: They take the generic components and repackage them as a new solution to a problem.
For example, Galderma has taken an old, reliable, generic antibiotic (doxycycline) and repackaged it as a new, much more expensive, solution to rosacea (a skin ailment), a solution which must be prescribed by a physician. Could someone with that ailment get a prescription of the same dosage of the old antibiotic at a significantly reduced cost? Sure.
But thanks to reinventing, repackaging, rebranding, and repositioning, Presto! A new and profitable product.
Or, on the non-prescription, over-the-counter side, if you look at the ingredients in Mucinex®, you’ll find these same ingredients in a variety of decongestant and expectorant products, at significantly less cost.
But thanks to reinventing, repackaging, rebranding, and repositioning, Presto! A new and profitable product.
Marketing a commodity is not a simple task. The easy way is to compete on price; but this has real and dangerous long-term risks. Relying on a heritage of brand loyalty is, at best, a steady-state proposition. Even iconic brands can die. Alas, Twinkies will be with us no longer.
Practical Marketing Rule # 7: Those companies that practice the basics of tried and true marketing – knowing your customers, your market, your products, and your potential products – can find profitable ways to thrive, even in a commodity marketplace.
