Don't Be Commoditized

by Steve McKee

The other day I met with about a dozen smart, aggressive CEOs, all of whom run successful companies. Most of them, like most of us, are struggling in the current economic environment.

The conversation turned to the pressure on margins they're facing, particularly in industries where distinguishing one competitor from another can be difficult. The question on the table ultimately became this: if you're operating in a "commoditized" industry, what choice do you have but to compete on price?

Plenty. I happen to believe that there is no such thing as a truly commoditized industry. Think about it - if milk or orange juice can be branded, anything can be. Even if your offering is virtually indistinguishable from what competitors provide, the way it's promoted and delivered - from packaging to timeliness to inventory management to the terms offered - can set your brand apart.

It all goes back to the fundamentals of marketing and the Four Ps. While your "product" might be very similar (even identical) to that of your competitors, there are three other Ps in the toolbox with which you can differentiate. For example, while Coke and Pepsi might take issue with being called commodities, to most people they are acceptable substitutes as far as the caramel-colored beverage in the bottle is concerned. Yet both companies relentlessly work to differentiate themselves along packaging, distribution and promotional lines, often with a great deal of success.

Don't cop out if you operate in a highly competitive industry, complaining about having to compete on price. It's not true. Find a way not to be "better", but "different," using all of the tools in the marketing toolbox. Accepting "commodity" status is a choice you make. Or don't.

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.