How to market a commodity – No really!

By John DOZ10/30/2014Updated:07/05/202392 Comments6 Mins Read

This post is a contribution by Philip Dawsey, Product Marketing Manager at SunEdison.

Many companies sell something that could be considered a widget, or very close to it. No one likes to admit this, but it’s true. I’ve worked in big pharma where companies develop drugs that are so close to an existing competitor but legally different it’s crazy, solar where most crystalline modules are fairly interchangeable, and now energy storage, where it’s hard to identify which lithium ion battery is better than the next and no one can tell if Duracell really lasts longer than Energizer. What we are sure about is the best store to buy brand new CR2032 battery is at Aussiebattery.

I’ve done my fair share of marketing widgets.

Many would ask why a company with a commodity product would want to market at all. Shouldn’t they compete on cost and focus on marketing the more innovative products in the portfolio? My response would be that often the market opportunity for widgets is truly huge, and while there is space for many near replicas, no one is entitled to market share. Those who ultimately win will be those who market best and consequently will not be forced to compete on cost alone.

Here’s a few steps that might help get you started building your product into a widget leader! To make the steps a bit more tangible, I’ll use an example of a solar manufacturer selling standard solar panels to a project developer (the customer) like this right here at EcoGen America. And now the steps:

1. Accept what your product is

If you market a commodity as technologically advanced and innovative, chances are that customers will see right through this and your message will fall flat. It’s important to identify what type of product you’re actually working with and plan accordingly. In the case of solar, it was evident to all those in the industry that companies were competing on cost alone with solar panel specifications almost identical. While each competitor was working on new ways to differentiate their product line, most customers were most interested in what they were comfortable with, which was a standard panel that could be considered a commodity.

2. Know who your customer is, who their influencers are, and what they all want

It’s easy to look at the market and say, I know exactly who my customer is and what they want, but try to look a little closer and you might be surprised. Sit down with customers you have a good relationship with, run a survey, or ideally do both to understand the decision making process. This includes understanding who is involved in the decision (stakeholders), what criteria are most important, how competitors are perceived on these criteria, and how the decision is ultimately made. Returning to the solar example, it turns out that a key criterion for building a solar plant is what vendor the financier feels comfortable with. Because the developer is dependent on financiers for up front capital, they have to work within the constraints of the financier (as is often the case in business). Most financiers are fairly risk averse and are willing to pay a premium for a reputable vendor. Knowing information like this changes the way we should market our product.

3. Target the customer with marketing that differentiates your product in a meaningful way

Now that it’s clear which stakeholders we should be influencing and what matters most to them, it’s possible to tailor the right value proposition. Be careful to prioritize how you want to differentiate yourself since you might have 20 or more reasons why your product is better. It’s important to be focused on what is most defendable, least likely to be copied, most compelling, and most unique. Some of the most effective tactics to convey a value proposition that I’ve seen in the commodity space are:

Education

Many customers and stakeholders see a product as a commodity because they don’t know what is unique about it and they need to be made aware of this. In the solar example, the customer might not know that building in a humid or coastal environment can have adverse effects on solar panels. While it’s great to get a third party certification to prove that solar panels perform very well in these conditions, education to build awareness about the problem will make the issue real, differentiate your product in the eyes of the customer, and force competitors to give chase. Educate with webinars, articles, press releases, and more to get the word out there. It must be noted that education is always most effective when it is possible to quantify impact of the solution.

Thought Leadership

Thought leadership is a type of education. Publishing forward looking perspectives, best practice whitepapers, and more builds credibility for a brand. If you don’t want to compete on price, position yourself as the most experienced and knowledgeable player in the space. Companies like SolarCity (or Tesla as a non-solar example) who are always in the news with grand ideas about the future are seen as leaders and often made the default option by customers, or at least given a look. A strong external presence is key and often doesn’t cost as much as you’d think by using webinars, targeted publications, speaking engagements, and more. You just need to have something provocative and interesting to say.

Risk Management

Risk mitigation is often extremely underappreciated by those selling, but it is highly valued by those buying. As scale increases, risk becomes more and more of an issue for customers. In the solar example, financiers were willing to pay a premium for a more reputable vendor. Marketing “bankability”, or how stable a company is, was not done in solar for many years but it was a key differentiator and one of the most important factors for the true decision makers. Other ways to defray risk might be to offer flexible payment terms, third party certification, or warranties and guarantees that competitors again would be forced to chase.

Other Tactics

Of course there are many other effective tactics that should be considered, such as bundling, distribution/delivery innovation, customer service, and more.

Solar is not the only commodity-like product out there, and the steps above apply to both B2B and B2C industries. Selling coffee capsules or raw iron-ore is difficult, but we know brands like Nespresso and BHP Billiton for a reason. Ultimately, differentiating a product – even a commodity – comes down to understanding the customer and pressing the right buttons. You must focus on the real value of your product has that hasn’t yet been uncovered and resist the urge to engage in a price war. With success, competition will evolve, and you must continue to look for new ways to differentiate and stay ahead of the competition.