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Even Commodities Can Benefit from Value-Added

Sunday, July 1, 2007

The Society for the Advancement of Consulting® (SAC) has canvassed its global membership and found that clients can improve the positioning of even commodity offerings by attaching a value-added dimension.

"Too many companies just surrender to price cutting and thin margins," notes Alan Weiss, Ph.D., the CEO of SAC. "But our membership reports that value can accrue to nearly any offering, thereby differentiating it and creating the potential for higher profit margins."

SAC member Ross Mitchel of Implementations, Inc. in Austin TX, observes: "The more an industry is commoditized, the more important it is for companies to recognize that how they deliver their product or service can set them apart even more than the product or service itself. In almost any industry, there is still room for companies to differentiate themselves purely by the quality of the customer experience they create."

For example, many years ago when Kodak was faced with severe price competition from Fuji which they could jot match given U.S. labor rates, they stopped selling "film" and started selling "memories." They played on the power of their brand to suggest the value of using a highly reliable product for a daughter's wedding, a distinctive vacation, and a son's graduation.

There are dentists who charge far more than normal insurance reimbursement rates which clients happily pay out of their own pocket, because the dentist plays their favorite music, puts a hot wrap around their neck, and even offers manicure services. Cars were the ultimate commodity sale until they became the largest life style purchase that most consumers will ever make. Everything from shampoo to hand cream, and from glue to vodka, has special characteristics and singularity making it less of a commodity and more of a personal choice.

"Value is in the eye of the beholder," says Weiss, "and outstanding organizations are realizing that their marketing should focus on creating relationships, singularity, and brand loyalty for even the simplest products and services.

"If running shoes can be about personal choice and style," he concludes, "then so can dog food, tools, and underwear. A product or service only defaults to a commodity when the manufacturer and distributor allow that to happen."

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