From Here to Anonymity: The Vicious Cycle of Commoditization

The story all is too common:

International Widgets spends years and countless R & D dollars developing “the next big thing,” unveiling it with the usual hue and cry.  It’s a smash hit.  People can’t live without it.  Then, six months later, ten other companies are offering the same thing or better, often for less.  Suddenly, the wonks at International Widgets are in a state of panic, struggling to hold margins and maintain market share.  Erstwhile heroes become zeroes.  Heads will surely roll.

Welcome to the vicious cycle of commoditization—a byproduct of light-speed 21^st-Century commerce.

It’s the circle of life—and death
Affecting both products and services, commoditization is a familiar waypoint in a lifecycle that includes innovation, birth, growth, maturity, decline and, ultimately, end of life.  After all, nothing lasts forever—aside from maybe Hostess Twinkies®.

Who or what’s to blame?
Insatiable demand from a rising worldwide consumer class.  Digital workflows.  Global networks.  Collaborative software that lets dispersed teams work together in real time.  Instant customer feedback through social mediums.   They all conspire to make the jaunt from innovation to commoditization fast, furious and endlessly challenging.

The good news is that developing inventive new products and services is still the best path to success.  The bad news is that if you want to play in the park you’re going to have to get on the merry-go-round, no matter how quickly it’s spinning.

When whining fails to work
Before you go off and sulk like International Widgets, consider what you can do about this alarming situation.  Here are a few suggestions that will help your offerings stand out:

• Polish your brand image
  Products and services come and go, but great brands last forever.  Faced with two similar choices, consumers will often attach themselves to the sexier brand.  Logic be damned; the fact is that cool sells.  So deal with it:  Ask yourself, “Apart from goods or services, what value do customers receive when they transact with my brand?” Make sure your brand experience transcends words, pictures and things, making for a memorable interaction from the point of consideration to the point of sale and beyond.

• Differentiate or else
  “The cup holders sell the car,” or so the saying goes.  They don’t, of course.  But, again, amid a sea of sameness maybe the fact that your TV adjusts color to ambient light is enough to close the deal.  Perhaps the famous freshly baked cookies from the Doubletree Inn are enough to make you want to stay there.  Who knows?  Along with effective branding, product differentiation is about the only tactic that will consistently distance you from the competition.  Just make sure your messaging drives it home.

• Bundle products and services
  If your individual offerings aren’t enough to light their fire, group products together in unique ways and see what happens.  Insurance firms and companies like Time Warner or DirecTV do this quite well.  You might also consider “wrapping” products with a service.  Go ahead and sell your solar panels at a discount; but include a free annual tuneup in the bargain.  Get creative, especially when it comes to using soft costs.

• Service the hell out of your customers
  Online retailer Zappos sells shoes and clothing items at low, low prices just like a hundred others of its ilk.  The difference is that they absolutely kill it when it comes to service, which is probably why more than 75 percent of their business comes from repeat customers.[1] In an age where some say the brand is dead, nothing keeps it alive—and keeps folks coming back—like great customer service.

The same drivers that power the vicious cycle of commoditization create a world of opportunity for companies willing to embrace it.  So, unless you want to bail out altogether and become a florist, why not sharpen your game, dive in reap the rewards?