Inbound Marketing Strategy

Warning: Selling a Commodity is a Direct Road to Bankruptcy

Brad Smith
December 20, 2011

According to Investopedia, a commodity is “a basic good used in commerce that is interchangeable with other commodities of the same type”.

It’s basic and interchangeable.

A commodity is regular, ordinary, and low-cost.

You can’t compete on low cost.


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Image courtesy of JIGGS IMAGES



How to Escape Being a Commodity

If you’re a commodity business, then you’ll always compete on price.

The problem is that being the low cost provider is very difficult. You have to produce more goods, far cheaper than anyone else.

The good news, and bad news of being the lowest cost is this:

There’s always customers willing to take the cheapest price.

So you can compete in the short term. But in the long term, it’s a very difficult road to building a business on low margins and apathetic customers.

Don’t just sell your “product” or “service”. Sell a belief and an experience.

Almost any product or service can now become a commodity. You can do your taxes for free online using TaxACT, get basic services from Legal Zoom, or even hire firms from other countries for half the cost.

So you need to make yourself different from the competition and other alternatives. But it needs to be more than just price.


A Lesson in Customer Service

Forbes author Tom Gillis wrote about his recent shopping experience.

Every time he takes his car into the Volvo dealership, they charge him for something. No matter how insignificant, or who’s at fault. They’re trying to squeeze our maximum profit from one sale.

In contrast, the large retailer Nordstrom will accept any returns. They took back Tom’s old pants because they no longer fit… even though he admits it was probably the fault of his waistline, not the pants.

Still, Nordstrom took them back. Did they lose money up front? Maybe a little bit. But they’re playing for the long-term. And now they have a customer’s trust (and wallet) for life. Not to mention real, viral (word-of-mouth) marketing from this message.

What was the better experience for the customer? And which will inspire you to come back again and again?


What a Customer Really Buys

Steve Jobs famously said,

Design is not just what it looks like and feels like. Design is how it works.

A customer’s experience isn’t just the widget you sell. A customer can buy your product or service anywhere.

So that’s not what they’re really buying.

A customer is buying an experience.

I can get a cell phone anywhere. But I love my iPhone. Sure I may pay more for it, but that’s because I like it the best.

That’s why people buy… because it gives them pleasure or takes away their pain.

It doesn’t matter if your “product” is consulting services, or a sushi dinner.

In San Diego, I can literally walk to over 10 sushi places in less than a mile. I can even buy sushi from the grocery store.

But I choose to go to Ra Sushi because it’s interesting, fun, and unique (and they have a pretty good happy hour 🙂 .)

Businesses that sell commodities, sell products.

Business that thrive, sell a solution – a customer experience that’s better than anything else.

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