Commoditization is where little difference is perceived between products, services or even businesses. Commoditization, therefore, results in price becoming the only differentiator.
Commoditization is a real and unnecessary problem for many businesses and tends to impact most heavily on small- and medium-sized businesses.
Why does commoditization exist?
Copper, gold, water and oil are commodities. Whilst each commodity is graded, there is very little difference between oil from one supplier and oil from another. Hence, oil is a commodity. It is only once oil is refined and transformed into diesel or petrol that there is an opportunity to add brand value and create a differentiated product. Hence, the price of fuel may vary between BP and Shell branded products, whilst the price of oil, as a commodity, will remain similar throughout the world. Think of commoditization of a business, product or service, therefore, as the supply of very similar products or services that have little or no perceived difference by the consumer.
Commoditization of businesses
The concept of commoditization unnecessarily affects a vast number of businesses that simply have no differentiated strategy. Many businesses actually contribute to their own demise and commoditization simply because they copy what the competition do. When commoditization is in play amongst competitors, it is tough for target audiences to see any real difference between offerings.
Price then tends to be the differentiator.
This can lead to lower margins and aggressive price wars. Competing on price alone is rarely sustainable for most small- and medium-sized businesses.
Commoditization of websites
The commoditization concept can also be applied to websites. Commoditization of websites, across entire industries, is the result of businesses or website designers that choose to copy competitor websites. It is, in fact, quite commonplace in certain industries for competitors to just copy the website that a successful competitor has created.
This simple process of copying a competitor website can lead entire industries toward commoditization. There are plenty of businesses that have done this over the years, which involves copying the sitemap, and wireframes, tweaking the design elements and just copying and rewording the website copywriting. This is incredibly shortsighted and if copyright has been infringed, illegal.
The rationale for copying competitor websites tends to go something like this:
‘If it’s good enough for them, then it’s good enough for us.’
Copying competitor websites is never a good idea and can lead to the commoditization of entire industries where little value and minimal difference is perceived between competitors. Just imagine if every website was the same. How would a given target audience know that they were even on a different business website?
As competitors are just a click away online, it’s never been so important to have a different strategy and to offer a unique experience.
Be brave, be different and achieve more
Ensuring sitemaps and wireframes are better than those presented by the competition is key. A competitive advantage can be gained simply by having a much easier to use website with a more pleasant and effortless user experience.
Making life easier, different, more compelling and more pleasurable for target audiences than that delivered by competitors can result in a tremendous uplift in sales. Add into the mix a clearly differentiated positioning strategy, a powerful mix of user experience, website usability and website copywriting, and the chances of transforming sales and achieving significant business growth suddenly becomes possible.
Avoiding commoditization actually is quite straightforward. It does involve thinking differently, creatively and strategically about presenting a given business in a unique and compelling manner. It is therefore useful during the website planning phase to conduct competitor reviews to see what is going on within a given sector. This information should then feed into developing a unique positioning strategy that clearly differentiates the business against its competitors.
Strategic thinking means choosing margins
Margin and prices are determined by positioning and the strategy that differentiates a business. Competitors may continue to charge the same as before, but a new positioning strategy adopted by a business may include an increase in perceived value. An increase in price can then be wholly justified to maintain the integrity of the newly adopted position.
Your next step…
Take a look at the work I did for Brightlines, RAW or Mind Tools to see how I helped create a different strategy for those businesses and the impact that this work had on their future success. If you’d like to discuss avoiding the commoditization of your business with your next website and would like to discuss how I can help with a different strategy, please get in touch.