Drucker once said: "In a commodity
market, you can only be as good as your
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 !
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.
your imagination is the limit !
market in a challenging business environment,
is making it harder for suppliers to make
& sustain differentiation.
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
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
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.
Decide which customers you do NOT want to
serve & stop doing business with them.
You will lose market share but improve profitability.
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!
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