How to avoid the commoditisation trap

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Portrait of a business leader, shot on Hasselblad medium format camera, global illumination, uplight, –ar 16:9 –seed 4000

As a business owner, are you constantly finding yourself caught in a price war, competing solely on the basis of cost? If that’s the case, the problem might not lie in the value you offer, but rather in how effectively you communicate that value to your customers. When customers cannot distinguish your value from that of your competitors, they are generally drawn to the cheapest solution. This phenomenon is known as commoditisation, and it’s time to break free from it. In this article, we’ll explore strategies to avoid the commodity trap, differentiate your business, and command a pricing premium.

Understanding the commoditisation trap

What is commoditisation?

Commoditisation occurs when products or services become indistinguishable in the eyes of customers, leading them to make decisions based solely on price. This race to the bottom erodes profit margins and devalues the unique benefits your business offers. To avoid this trap, it is crucial to ensure that the value your business delivers is clear and memorable, both internally and externally.

Building a strong brand

One effective way to escape the commodity trap is by creating a strong, memorable brand. Your brand should embody the unique qualities and value proposition of your business. It is the vehicle through which you communicate your value to the outside world. By developing a distinct brand identity, you can establish an emotional connection with your target audience, fostering loyalty and differentiation. A strong brand helps customers understand why your offerings are different and why they should choose you over your competitors.

Finding your niche

To differentiate yourself in the market and avoid being seen as a commodity, it’s essential to find your niche. Identifying a specific segment of the market that aligns with your expertise and caters to their unique needs allows you to position yourself as an expert and offer tailored solutions. By focusing your efforts on serving a niche market, you can develop specialised knowledge, understand your customers’ pain points better, and provide customised solutions. This approach enables you to command a premium price for your offerings.

Understanding wants vs. needs

To effectively communicate your value, it’s crucial to understand the distinction between customer wants and needs. While customers may initially express interest in low prices, they ultimately seek solutions that fulfil their needs and provide value. By conducting thorough market research and understanding your target audience’s pain points, you can align your products or services with their needs. Highlighting the benefits and outcomes your products or services deliver can shift the focus from price to the unique value you offer. By effectively communicating your value, you can attract customers who want to work with you and are willing to pay a premium to do so.

Creating a market of one

Aim to create a market of one where your business becomes the sole provider of a specific solution or experience. By offering something truly unique and hard to replicate, you can establish a competitive advantage that sets you apart from competitors. This could involve developing proprietary technology, implementing innovative business models, or providing exceptional customer service. Differentiation through unique features, specialised expertise, or a one-of-a-kind customer experience enables you to stand out in the market. This approach allows you to command higher prices because customers cannot find the same value proposition elsewhere.

Commanding a pricing premium

Once you’ve differentiated your business and established a strong brand, you can command a pricing premium. When customers perceive your offerings as unique and valuable, they are more willing to pay a higher price. By effectively communicating the benefits, outcomes, and quality your business provides, you can shift the focus from price to the value you deliver. Demonstrating your expertise, highlighting your track record of success, and showcasing testimonials from satisfied customers can help justify a higher price point. Additionally, offering premium features, personalised support, or exclusive access to special resources can further enhance the perceived value and justify a premium price.

avoiding the commoditisation trap

Final thoughts on avoiding the commoditisation trap

Escaping the commodity trap is essential for business owners who want to thrive in a competitive market. By focusing on effective communication, building a strong brand, finding your niche, understanding customer wants vs. needs, and creating a market of one, you can differentiate yourself from competitors and command a pricing premium. Remember, price isn’t the only factor that influences customers’ decisions. By clearly demonstrating the value your business delivers, you can attract loyal customers who appreciate the unique benefits you offer.

About the author

Dave Holloway is a highly experienced freelance brand strategist and designer based in Leeds. For 16 years, he ran a multi-award-winning creative agency working on a diverse range of projects for world-class clients. He now works in collaboration with creative agencies and directly with clients. Whether setting the direction through intelligent brand strategy, or tactical execution through digital and offline channels, he helps businesses of all sizes to communicate more effectively. If you have a branding project you’d like to discuss, please get in touch.