When has a product category been commoditized? Most managers and business scholars will tell you it’s when competing products are indistinguishable in terms of tangible features and capabilities. But our research shows that commoditization is as much a psychological state as a physical one. A commoditized market is one in which buyers display rampant skepticism, routinized behaviors, minimal expectations, and a strong preference for swift and effortless transactions regardless of product differentiation.That's from Marco Bertini and Luc Wathieu. It's an important insight because, as marketers, our impulse is to try and product innovate and communicate our way out of the commodity trap. But, if customers have become convinced that the available choices are all OK and that any differences between products don't really matter, our efforts may be in vain. We may just end up adding to the noise that the customer is trying to avoid and not shifting opinion in any meaningful way.
So, how do we escape from this kind of commoditization? We need something out of the ordinary to jolt the customer out of their mindset. If line extensions and new features won't do it perhaps an entirely new customer experience might?
But the authors come up with a different and counter-intuitive idea. They propose that you fight disengagement with the one marketing variable that these customers do still care about: price. If they are fixated on price then give them price, only do it in a way that challenges them to figure out what they are actually paying for and makes it more difficult for them to just go for the lowest price option. More on this in a later post...
1) How to Stop Customers from Fixating on Price by Marco Bertini and Luc Wathieu in May's HBR (subscription required)