Are You Commoditizing Your Products?

 We were at a new client’s offices recently meeting with their senior executives.  One of them was talking about how their existing offering was a commodity.  I remarked that if toilet paper isn’t a commodity (it isn’t), then their offering certainly wasn’t one either.  It has extremely high value to their users and their method of delivery and support added value as well.  He agreed and assured us yesterday that he no longer uses the term in his company.

 There is a lesson in that discussion for all of us.  The term “commodity” is something used by purchasing agents and procurement professionals to undermine a seller’s pricing power.  Their agenda is to short-circuit any discussions about the value of your products and services.  It is an act that is intentionally designed to make you think that your products and services have no value.

The problem is that salespeople hear the term commodity so much that they start believing it.  Then the customer services people believe it and eventually the senior executives believe it.  When everyone believes that your products and services are commodities, you have no pricing power. 

 How about you?  Do you use the term “commodity” freely in your discussions with your people?  If you do, you’re undermining your pricing power.

Here’s a bit of advice: STOP USING THE WORD COMMODITY!!!!

People use your products and services because they value them.  They don’t think they are commodities because they have chosen to use them.  That is a fundamental fact of doing business.  Just because a buyer who has an agenda to get a lower price uses a term like commodity doesn’t mean they are right.  In fact, we find that in most cases they are wrong.

If you need to, go out and talk to your real users and find out what they like about your company.  Find out how they value the things you do.  They’ll tell you.  They’ll be glad you asked.  Then, go back and make other executives stop using the word too.  When anyone—ANYONE—uses the word commodity, stop and tell them that a) your products and services create high value for your customers and b) using the word commodity to describe them undermines perceptions of value with your salespeople and your customers.

In Pricing with Confidence, we use the example of how the executives from a dirt company realized that they weren’t selling a commodity.  We use that example because if dirt isn’t a commodity then virtually nothing is.  We use that example because too often we hear the term commodity from high value technology, software, medical equipment and financial services executives.  The sad part is they honestly believe that commodity really does describe their products and services.

So, start being a value leader in your firm.  Stop using the term commodity.  When other people use it, tell them why they are wrong.  If that doesn’t work, go to the local pet store and get one of those shock collars and start making some of the senior executives wear them–that will work.