It’s always been tough to differentiate ourselves in the marketplace, to give customers reasons they should do business with us instead of our competitors. And now thanks to the internet, it’s gotten even tougher. At one time, there was some mystery, some mystique about what we did and how we did it. No more. People now know, or can find out, just about anything they want to know about us, our business, and our industry. And with that knowledge, all of us start to look more or less alike. In short, we’re in danger of becoming commoditized.
We need to understand that nobody wants to buy our stuff, they just want to buy what it can do for them. It’s the old story that nobody wants a drill, they just want a hole. So the answer to commoditization is to be the company that comes up with unique, creative, elegant solutions to customer problems. If your company is focused on that, and not on simply pushing products or services, differentiating yourself will be easy, and commoditization will be a non-issue.
Below is a case study about a company that sells the commodity of all commodities . . . dirt. Well, not exactly dirt, sand and gravel to be more precise. Still, it’s pretty tough to convince a customer that your sand and gravel is any different than the other guy’s. If you want to see how a creative solution really differentiated an otherwise totally commoditized business, please read below.
Bob’s Awesome Aggregate (a fictitious name) is a California company that provides sand and gravel to large road building and commercial construction projects. Bob founded the company and had done reasonably well with it, but he struggled to grow it to its potential. The problem was a fiercely competitive marketplace. Whenever a building contractor would put out a bid for sand and gravel, there would be a dozen companies bidding for the job, and the building contractor wouldn’t really have any way to distinguish between them. They all had access to dependable supplies of material, and they all could deliver the material to the job site promptly when it was required. So everyone got a share of the available jobs, but nobody could really break out of the pack, including Bob.
It was the industry practice at that time to sell only full truckloads. So if the engineering calculations showed that a project would require 99 ½ truckloads, a building contractor would have to order 100 truckloads because no supplier could afford to send a truck and driver to a job site with only half a load. That meant that the contractor would have to buy half a truckload he didn’t need, but also, when the project was complete, the contractor would have to pay someone to haul away the excess material. Still, nobody really saw this as a problem. It’s just the way things worked. It’s just the way things had always worked back to the days of horse-drawn wagons. Full loads only.
As Bob thought about ways he could differentiate himself from his competitors, he began looking at this old industry practice of delivering full loads only. What if he could find a way to deliver partial loads to a job site . . . two thirds of a load, half a load, a third of a load . . . whatever the contractor wanted. The contractor wouldn’t have to pay for material he didn’t need, and wouldn’t have to pay someone to haul away the excess material later. But how could he send an expensive truck and driver out with only a partial load and not lose his shirt?
Maybe he could operate smaller trucks for those smaller loads. But no, they would still be too expensive to operate. They would still need a licensed commercial truck driver to drive them, the cost to insure them would be about the same, and he wouldn’t get as much use from them as he would get from his regular trucks.
He thought about dividing a load up among several contractors, but the logistics of getting fractional loads from the same truck to several different job sites, and getting them there when they were needed was just too daunting.
So, Bob thought, maybe this is why the industry grew up around the practice of full loads only. Maybe this is the only efficient way to do it.
Bob had originally rejected a pricing solution because just as he couldn’t afford to send a partially loaded truck to a job site, so a contractor couldn’t afford to pay the true price of that partially loaded truck. But then he started rethinking a pricing solution, this time incorporating the contractor’s cleanup costs to have excess material removed. He was able to come up with a pricing scheme for partial loads that charged a premium for the material, but that premium was more than offset by the cleanup savings the contractor would realize. So everybody wins. The contractor saves money overall, and while Bob didn’t make much money on the partial loads, being able to offer partial loads gave him the edge he needed to win more bids and to differentiate himself from his competitors.
Now it may seem like Bob’s solution should have been obvious, but because the practice of full loads only was so ingrained in the industry, it was overlooked. So as you think about ways to differentiate yourself, think about time-honored practices in your industry that don’t work to your customer’s advantage. Think about things people dislike about doing business in your industry, and then be the company that does those things differently.
If you’re trying to stand out in your market, stop selling your stuff. Nobody’s interested in it. But they do want, and are willing to pay for, smart, well-crafted solutions to their problems.