Taking Stock of Commodities
When you hear the word “commodity,” it probably brings to mind pork bellies, copper, or oil.
Or maybe even livestock. While pigs and cattle don't seem that interesting, at one time, livestock was such a prized possession that the hottest status symbol was a painting of your cow.
Whatever the commodity, these aren’t terribly exciting industries, but they’re essential to the world in which we live. At the macro level, they’re generics — that is, they are goods that can be appropriated by any brand.
But what if I told you that what you provide is a commodity? It doesn’t matter whether it’s in financial services, consumer packaged goods, quick service restaurants, automotive, consulting, or anything else.
The product you sell or the service you render can be replaced (or reasonably replicated) by some third party. You may think you have an unconquerable hold on the market, but it can change in a moment.
Especially in today’s environment, when DTC companies are sprouting up everywhere. Case in point: I’m sure Gillette never saw Dollar Shave Club or Harry’s coming.
So how do you avoid such a drastic fate? Or even one where your market share is chipped away by competitors?
In my mind, there are two ways of going about differentiating yourself in a sea of commodities.
The first is with your brand.
First, let me ask you this: if you drink soda, are you more of a Coke person or a Pepsi person?
[Now, I realize that in the 21st century, admitting that you’re a soda drinker is like admitting you’re a smoker, but go with me on this.]
The whole reason Pepsi came up with the “Is Pepsi okay?” campaign is because so many people ask for a Coke at restaurants, and the staff is almost apologetic about it. The Coke brand affinity is that strong.
Do you think Coke drinkers would allow the brand to be replaced by Pepsi (or any other cola for that matter)? Most of them would not.
Why? The brand is that strong. Yes, the product underlying the brand is at the core, but the brand matters.
If you can create a strong brand such that your offerings are consistent and live up to customer expectations, then you'll be able to fend off the competition.
The second way to differentiate yourself is through service.
You’d probably view the major U.S. airlines (American, Delta, United) as commodities. They all move people from one city to another, in pretty much the same kinds of planes (no Boeing 737 MAX jokes) and comparable fares.
Travel is one of the most difficult industries: people are cramped, luggage goes missing, flights are late — it’s a crucible of simmering tempers, especially these days. If one thing goes wrong, a customer might snap.
A few years ago, following its merger with Northwest, Delta began doing something different. They focused on service: that is, the entire customer experience.
Their crew members thank Skymiles Medallion members by name; their Comfort+ and Delta One tickets afford travelers a bit more luxury than they might get in Main or First Class cabins; the mobile app is probably one of the best in the business.
There are many more examples along the customer journey that I could give you, but you get the idea.
How did they get there?
After every customer service call, they asked you to hold on the line for a brief survey.
Ugghhhhh… not one of those!
But Delta’s was different: they wanted you to answer just one question.
That question:
“If you owned your own business, on a scale of 1-5, how likely would you be to hire the person who just handled your call?”
Boom.
And like that, it became apparent what mattered to Delta.
Treating customers well became their mantra. Whether it was in flight, on the phone, or through various levels of loyalty programs, Sky Club visits, partner cards, or more.
Everything Delta did was related to service to the customer.
At the end of 2019, the company was 30% more profitable than the previous year and had a record $1.6 billion in profit sharing for its employees.
They could have undercut their competition on pricing, crammed more people in planes, or reduced headcount to become more profitable.
But they chose to focus on service.
In his Nicomachean Ethics, Aristotle spent some time talking about the rare commodity of true friendship.
He reasoned that we all need friendship and companionship, and would seek it out of necessity, that like-minded people would be attracted to each other, but it takes effort to make it work — particularly by being kind to each other:
“People who are in need desire benefits—even those who are supremely happy desire to spend their days together, for solitude suits such people least of all. But people cannot live together if they are not pleasant and do not enjoy the same things, as friends who are companions seem to do.”
And that’s a valuable commodity.
Thanks, and I’ll see you on the internet.
