By Ron Baker

There is no such thing as a commodity. Anything can be differentiated, which is precisely the marketer’s job. Believing that your firm – and the services it offers – are commodities is a self-fulfilling prophecy.

If you think you are a commodity, so will your clients. How could they believe otherwise? This notion of selling a commodity is a pernicious belief. It leads to price wars, incessant copying of competitor’s offerings, lack of innovation, creativity, and dynamism, as well as suboptimal pricing strategies.

Imagination is the only limitation

The potential for competitive differentiation is only limited by your firm’s imagination. Many leaders lament that since their industries are mature, commoditization is inevitable, despite all the empirical evidence surrounding them that this is simply not so.

Even the lettuce business has been differentiated by prewashing, cutting and packaging the vegetable – along with some salad dressing on the side – for the customer in order to save time. As a result, from the late 1980s to 1999, a $1.4 billion industry was created. And Great Northern Wholeave Lettuce has come up with the innovation of ripped lettuce (not cut), offering restaurants a way to handle waste and save time. Wholeave Lettuce commands a premium price.

Purging the commodity word

Unless your firm decides its strategy is to compete based on price – such as Wal-Mart, Costco, H&R Block, and Southwest Airlines – you cannot create a loyal client base solely on the basis of being the low-cost provider. If clients are attracted by your low fees, they will easily leave for another firm that offers even lower ones. Cutting your pricing in order to attract a client encourages them to ask constantly for future price concessions, thereby subsidizing your worst clients at the expense of your best ones.

There is absolutely no excuse – none – for firms to think of themselves as commodities. Any company can compete on price; it is truly a fool’s game. On the other hand, competing based on your ability to create value and intellectual capital requires more thought, creativity, and investment.

Not just more business, but the right business

If your firm finds itself continually competing on price, it is taking the easy way out – since price is always the easiest way to win marginal business. It is also the obvious factor to blame for an organization’s failure to offer value-creating ideas and services. Constant discounting signals that you are targeting the wrong client segments, lacking a viable value proposition separating you from the competition, not getting your share of new business success, or offering too much service in your basic package.

Don’t let your firm acquire a core competency in cutting prices by falling into the commodity trap. Especially since there’s no such thing as a commodity!

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Ron Baker is Chief Value Officer of Ignition, a consultancy devoted to helping marketing organizations create and capture more value. He welcomes your comments at rbaker@ignitiongroup.com