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June 27 2019.
You are as good as your dumbest competitor!

Peter Drucker once said: "In a commodity market, you can only be as good as your dumbest competitor."

How often you've heard, "Its a commodity market out there, how can I get sales or profit margin? You wonder, whether its a convenient excuse or a valid point !

In a commodity market, there is immense opportunity to differentiate your product (& service) by availability, delivery, shipment quantities, payment terms, and all the other services that accompany the core product.

Only your imagination is the limit !

Commodity market in a challenging business environment, is making it harder for suppliers to make & sustain differentiation.

So what can you do in this situation?

# Innovation. A new product that better meets consumer needs, even an upgrade of an existing product, can help you differentiate from the competition. It will force them to invest in matching or exceeding the new specifications.

# Package. Selling a commoditized product wrapped with a differentiated support services (such as after-sales service) can appeal to buyers willing to pay a premium for the convenience.

# Segmentation. Markets can be divided profitably into multiple segments. Marketers can focus on providing applications expertise for less price-sensitive customer segments for whom the product is still important.

Innovate at all levels.

1. Decide which customers you do NOT want to serve & stop doing business with them. You will lose market share but improve profitability.

2. Compensate your salesforce on profit margin, not sales revenues. A volume-based incentive plan will attract any customer, regardless of profitability. That's OK early in the early product life cycle but not at the maturity stage. You will be amazed by the innovative solutions of the sales people to get better margins!

3. If you aren't the low cost producer, offer varieties & options in your pricing structures so the customer can't easily make side-by-side comparisons. Varieties & options can be customised for each customer situation. This requires deep understanding of customer requirements (& problems !)

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