Commoditization of products and services is occurring more quickly today than ever before, and nobody is feeling the pressure more than businesses that generate the majority of their revenue by selling into other organizations, otherwise known as Business to Business (B2B) firms. Commoditization occurs when products and services become indistinguishable from, or inferior to, the competition’s offerings, thereby eroding a company’s ability to charge a premium.
This cascades down into missed revenue and margin targets, a limited ability to produce an ROI on R&D, and the evaporation of market share. While the challenges of commoditization have plagued businesses for decades, the accelerated rate of commoditization (RofC) in today’s fast-paced economy, is making these problems increasingly difficult to manage.
While commoditization benefits customers – the products and services available in the market are continually getting better or cheaper, and they are doing so at an ever-increasing pace – it wreaks havoc on businesses, especially those with high-priced items that have a long time between buying cycles (e.g., MRI machines), hence why B2B firms are impacted most significantly. If a company isn’t creating the most recent, advanced version of a product or service, then their existing offerings quickly lose out to better or lower-cost competitors.
Achieving Renewable Differentiation and competitive advantage is now based on a company’s ability to remain relevant in the eyes of their customer. This requires companies to:
• Deeply understand their buyer.
• Know how to solve their buyer’s problems.
• Maintain a reputation as a trusted advisor who is capable of helping the buyer capitalize on opportunities and overcome challenges to win in the future state.
To learn more about how to combat commoditization, click here.
Written by: Anthony Paluska
About the Author: Anthony Paluska is a Partner at McMann & Ransford with experience helping organizations overcome commoditization by developing stronger, more intimate, relationships with their customers. He has leveraged his management consulting, problem solving, and change management skills to support 15+ Fortune 1000 organizations, across a multitude of industries.