Most of us in business fight unrelentingly to make sure our product or service is not commoditized. As entrepreneurs we understand that commoditization is a death nail in the coffin because price has become your most important value proposition. The inherent risk in a sales strategy positioned around price is that eventually someone will come along and offer what you offer for cheaper. Being the cheapest is almost always a losing proposition because then you have to sell on volume. That’s not necessarily a bad thing, until the next “cheap” guy starts cutting in on your client base. When that happens you must either further lower the price of your product or service or re-introduce a new value proposition to justify your price as compared to the new “cheaper” offering of your competition. This is kind of like McDonalds, once just competing on price, and now competing with their new “healthy” line of food.
A coffee bean is a commodity. Coffee beans sell on price. That coffee bean has a full spectrum of opportunity. It may remain a coffee bean, forever condemned to justifying its value based on its price, or it may be transformed into something so much bigger than itself, something like an experience. That coffee bean may become a mocha, choca, latte, talle, where, combined with dim lights, soft music, and excellent service, that little bean demands so much more than its peers. Yes, that bean moves away from being an expense, a price driven commodity, into an investment into something bigger, like the start of someone’s day.
Here’s the bottom line; don’t become a commodity. If anything, build a brand and a business that is so robust that you end up turning your competition into the commodity. When someone is shopping for the cheap, low cost, alternative, you don’t want them shopping from you. Anyone looking hard enough will always find a cheaper option (or at least an option that they perceive as cheaper), so don’t even throw your hat into that ring. Here’s how to not become a commodity, and better yet, how to turn your competition into one.
1. Never Engage in a Price War: If you end up in one, you are a commodity. This simply means you have not defined your product offering well enough or that you haven’t presented it well enough. For example, for many years when recruiting professionals to my sales team, I had no proper presentation. I would meet with candidates for my sales team offer coffee where I would share a dialogue about my offerings, but did not offer a formal presentation to fully share my value proposition. Back then, it was not unusual for me to end up in a price war. Today I have a formal presentation that explains the value proposition of my firm over others. The bottom line is, I don’t get in a price war. I am not the cheapest firm, and I acknowledge that openly and proudly. My presentation makes it clear that I am more expensive than my competition and explains why. You can’t be cheap and offer extreme value.
2. Branding and Marketing Must Steer Clear of Price: It’s not unusual for consulting clients of mine to adamantly deny that price is part of their value proposition. These are the same clients that include pricing information right in their marketing and brand campaigns! There’s a lot to be said for that high end steak house that does not list prices on its menu. Are you listing price on your menu? If you are, you are asking for a price war? Don’t go there. Pricing is a conversation you want to have with a buyer, not a shopper. Your brand and marketing campaign should create buyers. Until you have a buyer in your clutches there is no need to have a conversation about price. How many people get up and leave that high end steak house because there are no prices on the menu? It happens I am sure, but not often. Their branding makes a statement; “If price is important, don’t eat here!”
3. Be an Asset, Not a Liability: There’s a cost involved in buying your good or service, right? Wrong! If there’s a cost, you’ve got a tough road to greatness. You need to effectively explain the return your buyer will reap by buying from you. Will the buyer save time or money by choosing you? Maybe your offering increases the buyer’s time on earth if you are offering greater health? If you save the buyer time or money or create more time or money for them, you are selling an asset, not a liability. Your selling lingo must include words like investment and ROI. The word “cost” suggests that your product or service creates a liability or expense and nobody wants more bills. The only time you should speak in terms of costs or expenses is when you are talking about the offerings of your competitor. Who are you to say whether their offering is an asset or liability? When it comes to the competition I always err on the side of caution and assume that their offering is nothing more than an additional expense to the end buyer.
Through a tough economic recession these past five years, Apple continues to sell iPods, iPhones, iPads, and more. They fly off the shelf. Buyers of these products are not comparing prices with similar products on the market, because Apple does not define price as part of their value proposition, thereby taking themselves out of a potential price war. Yes, there are similar products that are less expensive. Apple is ok with it if you go buy the cheaper version of their creation, because whatever you are buying, it’s not Apple…if you are ok with that, they are too. The best businesses in the world work relentlessly to build and demonstrate a value proposition that is not price dependent. As a business owner, CEO, entrepreneur or leader, to build a great business, one that is sustainable into the future, take a good look at what you are selling. If a coffee bean has so much potential, what is possible for you?