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Creating a Brand In a Commoditized World

Thursday, February 8, 2007

In today's commoditized world it has become increasingly difficult to find that competitive edge. It used to be that a company could create a thriving brand based on some sort of technical advantage that the rest of the marketplace lacked. This technical advantage helped the company create a product that was either far superior or much less expensive than competing products. The marketplace took notice and the company thrived. Over several years of holding this technical advantage, their brand was formed.

Today, the playing field is leveled. Companies of all sizes (including tiny startups) now have virtually the same access to technology and information like never before. The technical breakthroughs that happen today generally spread like wildfire. Soon after a company announces a unique way of doing something, everyone else is doing it, too. You're hard-pressed to find similar products that have a large degree of variance in quality. Today, you're pretty much getting the same thing for about the same price.

But, there are exceptions.

These exceptions are the companies that are the new brands of today's world. Think of a company like Starbucks. Here is a company that is selling a product that is about the same quality as their competition, yet they are charging much more for their product compared to the competition. Of course employees and fans of Starbucks will argue that the quality is far superior and therefore the reason for the price difference, however if we are looking at this objectively you will find that there's no evidence to support the claim of superior quality. In fact, some people will claim that there are now fast food establishments serving coffee that is of 'high quality' for about half the price that Starbucks is charging. In this situation we can see that 'quality' is very much a matter of personal opinion.

So why is Starbucks winning?

Why are they able to charge so much more for their 'commodity product'? Is their coffee far superior to their competition? Are they growing a massive company because of a quality advantage? The answer to both questions is a resounding 'NO!'

Companies like Starbucks are winning because they understand that they have two products:

1) The Commodity Product

2) The Experience Product

The Commodity Product is the coffee itself. This is the product that they move through their company. It is the basis for collecting money from consumers in exchange for something. That's it. They understand this very well. It's just a ‘thing’ they sell.

The Experience Product is what they indirectly sell to consumers and they are masters at knowing their Experience Product. It is the most important thing they sell, yet nobody has ever directly paid for it on their receipt. Everything Starbucks puts into real estate, employee training, uniforms, background music, restaurant decor, cup design, menu lingo and more is what consumers pay for. If it weren't for these things, Starbucks wouldn't be Starbucks. You would have never heard of them.

Brand Exercise

I would urge you to think about the two products within your business. As an exercise, take a look at your invoices/receipts. Whatever is on the invoice/receipt - that's your Commodity Product. Now take a look at your 'books.' Everything that is NOT part of 'cost of goods sold' - that makes up your Experience Product.

Now it's up to you to determine the kind of experience you can create that is different in the marketplace. The kind of experience that engages with people on an emotional level. The kind of experience that reflects the personality of the company. The kind of experience that nobody else would even think about duplicating because it's so 'you' that it doesn't work for anybody else.

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