Branding as a marketing strategy has seen a significant increase in interest in recent years due to a variety of factors.
The increase in competition in just about every product category coupled with the ability for most consumers to quickly and easily seek out and compare all competing offerings via the Internet has put a great deal of pressure on brands to strengthen their positions and continually seek ways to deliver greater value to customers.
Companies are now fully realizing the importance of creating strong brands that provide real customer benefits so they can avoid the vicious practice of continual price slashing and cost reduction due to the downward pressure that exists in commodity markets. They're discovering that it is desirable to compete on more than just price and volume.
The Global Trend Toward Brands
Companies on a global scale now realize that one of the most promising paths to long term longevity, a prosperous organization, and healthy profits is to create and manage strong brands for their products and services. We are seeing countries such as China, Korea, India and Finland, put forth powerful brands with global impact. In the words of Scott Bedbury, author of the book by the same name, it is indeed "A new brand world."
Definition of Commodity
Commodity products are largely undifferentiated products that offer little or no perceived differences between competitive offerings. These are lowly differentiated products or services with high levels of substitutability and straightforward price discovery. Commodity products are fungible as competitive offerings are easily interchangeable.
With little-to-no perceived difference, consumers shop for commodities primarily on a low price basis.
Producers of commodities are driven to compete on low price and high volume. In general, the product life cycle is at the point where significant customer education and assistance is not required, customers have widely adopted the product, the market is mature enough to have attracted multiple competitors, and the market expands while prices decline as consumers demand price concessions.
How to Brand Your Commodity
How then do you go about branding a commodity product?
The answer lies in first identifying or devising ways to create unique attributes and unique promises of value offered solely by you and your product offering. This distinction as to why your brand is unique in your category is also referred to as your unique selling proposition.
Your unique selling proposition (USP) tells your target market the main and most important reason they should choose your brand over competing brands. Your USP is a claim of a unique set of benefits not found anywhere else. Once you have defined your most important unique selling proposition, then you begin to build your brand based on it.
Let's take a closer look at steps to commodity branding
Step #1: Conduct a comprehensive audit
Launch an initiative to understand how your current clients perceive you and your product or service. Conduct a brand audit and conduct primary research to understand why your customers choose your product. Commodity marketers are often very surprised to learn from customers that price is not the most important factor—let alone the only factor.
Study your competition and examine industry trends. How are your competitors positioned? What are their brands' or products' strengths and vulnerabilities? How does your position compare with competitive positions and how will those positions be affected by industry trends?
Conduct an internal audit in additional to your external audit. Find out what all stakeholders think and feel about your brand. What do they value? What guides their daily behavior on the job? What brand promises do they feel they must deliver on? Are their goals in line with the goals of your organization and your stated mission?
Lastly, conduct a communications audit to uncover the real messages you are sending to your internal and external stakeholders through your communications. Are your marketing communications saying the right things in the right ways consistently over time and across all media? Are your internal communications to employees and shareholders doing the same?
If you discover some inconsistencies and liabilities during this phase, fret not. Suspend judgment on what you find. Remember, the most important goal to accomplish at this point is to emerge with an accurate picture of the current state of affairs, be it pleasant or unpleasant. Only once you have accurately diagnosed any illness can you begin to prescribe the cure. Remain objective and seek to define things how they really are.
Step #2: Find and define points of differentiation in your offering
Once you have conducted your audit and surveyed the competitive landscape, then you can make a list of all the ways you are unique.
Provide reasons other than rock-bottom prices as to why you are different and why people should buy your products or services.
Even in industries where clients say, "all of the products from us and our competitors are the same," we can find branding opportunities.
Sometimes obvious differences will be defined in your product offering by this point. Other times not.
What else can serve as the basis for differentiation?
Uncover hidden differentiators:Many things can serve as the basis of differentiation for and subsequent branding of your commodity. These attributes can apply to your product itself, your service, your company, the support you offer, or other intangible qualities that are unique to your total product offering.
What makes your company unique and preferred in the mind of the prospect might be something in the product, something in the manufacturing process, or maybe even some strongly-held corporate belief or philosophy.
What have some commodity sellers used as points of differentiation?
A) New product features
Look for ways to create new product features that certain customers will value. Innovate and redesign your product to include new and unique features.
B) Plus 1 features
"Plus 1 features" are small, incremental differentiating features in products. By adding incremental features into your product offering, your brand may offer value not found anywhere else. Be wary, however, once this practice is common in any competitive environment there will come constant pressure to add Plus 1 features while continuing to cut price. This can be a good strategy in high volume markets that are expected to last indefinitely, however.
This strategy is often found in high technology industries where manufacturers will add Plus 1 features such as additional software pre-installed on computers, new ring tones for mobile phones, digital cameras in phone models, or Internet service providers who offer spam blocking software or personal Website storage space as part of the purchase in addition to their core product offering.
Bundling several options, features, or services into your package can significantly increase the value of your offering. You may be able to find ways to offer several features, services, or options and package them together to create a "bundled", value-added package. I've seen companies offer extended warranties, a supply of relatively inexpensive consumable items as "starter kits," and enhanced support packages in order to offer greater desired value to their customers and reduce the overall cost of ownership.
D) Payment terms and guarantees
Does everyone in your industry offer net 30 terms and 30-day guarantees? If so, then by offering more generous terms and longer guarantees you might be able to increase the value you offer without investing significant capital toward new product features and value-added "giveaways." Other tactics might be to do simple things that make customers happier, such as utility companies billing in equal, predictable monthly amounts to counter spikes during peak usage months, or being flexible with your payment terms to meet the standard business practices of your customers.
E) Better quality
Reduce your defect rates and the value you offer your customers will increase by improving reliability.
F) Reduce uncertainty
Offer money-back guarantees or other means to make it easier for customers to trust you.
Other ways to reduce or reverse risk are to offer free trials, lengthen money-back guarantees, promise free repairs or replacements, offer "try before you buy" evaluations, 100-percent-satisfaction-no-questions-asked return policies, free financing, or delaying your invoicing.
By segmenting your customers you may find different levels of risk-aversion amongst them. You may address such concerns by creating different levels of value to your customers such as a Bronze, Silver, and Gold levels of support packages available. This will help meet the needs of those who value additional assurance while proving a low cost option for those most driven by price alone.
G) Better product delivery
Find a way to get product to your customers better or faster. Often by increasing your distribution network you can offer faster response and reduced delivery time. Overnight shipping, staggered shipments to meet your customers' inventory needs, more secure shipping, or available backup delivery methods might be things you can explore. Sometimes just being the person in your industry with the highest on-time delivery or fulfillment rate can make the difference. Airlines often use their "on-time departure" ranking as a differentiator.
H) Packaging and design
Often innovative or eye-catching packaging of a product can serve as a strong differentiator and help become a part of the brand's DNA. For example, it is nearly impossible to see the unique colors and artwork on a bottle of Tide laundry detergent and not know which brand it is—long before you even see the name on the label.
Innovative, unique, and appealing packaging can alone be the only point of differentiation you need in order to start building a powerful brand.
I) Definition and communication
Define and communicate your standards for secure ordering, fulfillment, delivery, installation and training, and technical support. You might just promise something that none of your competitors are willing to put in writing. That, in and of itself, might make you unique in your industry… just be sure you deliver on your promises.
J) Customer-driven added value
Ask your customers what they wish you could offer or what they would like to see and often they will tell you exactly what you can do that cannot be found anywhere else. Customers have a way of knowing what unmet needs there are and they are usually happy when a company comes along and asks them how to serve them better. They are comparing you against your competition constantly and will often have insights and data that you don't.
Have a clear understanding of what your customers want and need before tying your brand to what you perceive to be a customer value. Don't try to guess what your customers might respond to. Ask them! More often than not they'll tell you. Just make sure you do it in a way that is valid and statistically significant through research. You might just uncover a benefit that you never would have thought about on your own.
K) Look outside the industry for examples
Intel looked to examples of component (or ingredient) branding in other industries such as NutraSweet, Teflon and Dolby for its inspiration.
Step #3: Choose the most compelling and unique point of differentiation to create a strong position for your brand
Perhaps even more important than defining points of differentiation for your brand is to make sure these points offer customer value for which your targeted customers recognize the value offered. Differentiators are nice, but not worth anything to you if your customers do not recognize them or see any value associated with them.
Why should somebody choose you over your competition other than price? The answer to this question might help you choose the best position upon which to build a strong brand.
There may be many possible positions for your brand but it is important to choose the one that is most defendable, least likely to be copied, most compelling, and most unique. Do not try to incorporate so many points of differentiation in your positioning that your customers become confused or overwhelmed. This might cause competition with yourself, cannibalize sales of your higher profit offering(s), and be very difficult to manage.
Be different! Find a way to offer something unique that cannot be found anywhere else. Your most important, unique, and least easy-to-copy point of differentiation should be the unique selling proposition for your brand and serve as the basis for your branding efforts.
Step #4: Eliminate reasons for your customers not to purchase from you
This one sounds deceptively simple, but often companies unwittingly offer certain things or behave in certain ways that turn potential customers away. Be honest with yourself and seek to uncover and understand the reasons customers choose to not do business with you.
In the computer and software industry we often see customer resistance to purchasing from vendors who "lock in" customers through proprietary systems and software. Other reasons people will not buy from you might be confusing billing and/or payment terms, poor post-sale support, unfriendly sales staff, or simply your location. Identify the reasons people avoid choosing you and eliminate these reasons if you can.
Step #5: Create a powerful image for your brand
Create and build a powerful image for your brand. Once you make your product or service distinctive, build your new image through a combination of words, imagery and other devices that appeal to human logic and emotion.
Choose or create a memorable name for your brand. Create a visually effective logo. Write a tagline or slogan for the brand that concisely captures and communicates the essence of your unique selling proposition.
A brand must communicate what it distinctively stands for using as few words and/or images as possible, so keep the message simple but memorable. Build the image so it is distinctive and easily recognizable to your target market.
Image alone can help differentiate a commodity-whether based on real or perceived benefits—as long as the strategy is executed properly. Images can be built to inform consumers about hidden or small differences that they might otherwise be unaware of and thus turn these differences into something that, in their own minds, they simply cannot live without.
A brand is an identifiable entity that makes specific promises of value and all aspects of your brand's identity must communicate those promises and convey the uniqueness of your brand so you create the desired image within your market.
Branding is more than the development of a memorable name, an appealing logo, or a catchy slogan. All components of a brand must work together to create a differentiated personality for the brand that heightens awareness while building preference. Such strategic awareness will allow the brand to enjoy greater loyalty from your market while commanding a price premium with better margins.
Step #6: Market the brand
Brand communication is an essential part of building a strong brand for your commodity. Commodity products require unusually clear communication of the value offered in both economic and emotional terms.
Highly targeted and sharply focused communication must take place within the framework of an integrated marketing communications plan that includes one or more parts of the marketing communications mix: personal selling, promotion, direct marketing, advertising, and public relations. The brand value must be communicated clearly and consistently over time and across all chosen communications channels.
Communicating your brand promise clearly, concisely, and consistently across all marketing communications channels will enable you to build strategic awareness. Strategic awareness occurs when not only do your customers recognize your brand, but they also understand the distinctive qualities that make it better than the competition. Strategic awareness occurs when you have differentiated your brand in the mind of your market.
Only when strategic awareness is established can you hope to create brand preference within your market. Once brand preference is created, then it becomes a scientific exercise to quantify the price premium that can be commanded by your brand.
Continually look for ways to innovate, create customer value, and stay ahead of the competition.
Eventually all forms of differentiation can be copied, so continually stay ahead of the curve to ensure that your brand remains differentiated from the commodity pack mentality. Do this through a comprehensive program of differentiation, image building, product development, consumer research, service, delivery and quality improvement.
Routinely measure factors such as: brand loyalty, name awareness, perceived quality, relevance and preference. Focus on continually improving the four core customer values of convenience, availability, product or service functionality, and relationship to find ways to continually increase the value you offer to your customers.
Commodity selling is a challenge that presents unique opportunities for creative marketing. When marketing and selling commodities, you must resist the urge to cut prices. Instead, seek ways to protect your price by offering more value, finding unique ways to differentiate yourself, and creating powerful brands that foster price inelasticity.
Copyright 2005, Dave Dolak. All rights reserved.
Dave Dolak, MBA, PCM, is an author, speaker and consultant on marketing and branding issues. This article was condensed from Dave’s e-book, "How to Brand and Market a Commodity," available at www.davedolak.com.
Dave may be contacted at Tel +1 (434) 975-6584, via email at: email@example.com, or through his website at www.davedolak.com.