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How to Avoid Commoditization in Today’s Marketplace [VIDEO]

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Are your services widely available and interchangeable with your competitors? In this video blog, Lee Frederiksen explains how to avoid commoditization of your services.

Transcription

Hi. I want to talk to you about avoiding commoditization of your services. What is commoditization? Well, basically, it’s offering services that are seen as widely available and interchangeable with your competitors. Ouch. That’s a problem.

Let’s look at what the signs are. How do you know if your services are becoming commoditized? One of the signs is RFPs. You’re getting RFPs. That’s an apples-to-apples comparison where people assume that services are pretty much equivalent. Another thing to look for is price pressure, downward pressure on your prices, with competitors undercutting each other, and the downward price pressure. And then, of course, when you hear clients say, “Well, that’s what everyone says,” when you say, “We’ve got great people,” you know you’re suffering from commoditization.

Importantly, these are widely seen threats. In our recent study, we found that 35% of people experience downward price pressure on their services, and another almost 30% saw commoditization of services. So those are two parts of the same issue. But here’s the good news. High-growth firms saw less, were less concerned about commoditization and downward price pressure.

So there are ways to do it better. What works? Differentiation. Making sure that your firm is different and the services you offer are different than your competitors. You can do this by increasing the visibility of your specialized expertise. Expertise is invisible so you have to make it visible by speaking, writing, so forth. Another close one is specialization. Specializing in a particular service, a particular industry, and of course, strong differentiators. If you’re not well-differentiated because of specialization or your expertise, then pick something else, some other attribute to really focus on.

If you want to learn more about how to differentiate your firm, go to hingeuniversity.com/differentiation to check out our differentiation course. You’ll find it very helpful in positioning your firm for future growth.

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Lee Frederiksen, Ph.D. Who wears the boots in our office? That would be Lee, our managing partner, who suits up in a pair of cowboy boots every day and drives strategy and research for our clients. With a Ph.D. in behavioral psychology, Lee is a former researcher and tenured professor at Virginia Tech, where he became a national authority on organizational behavior management and marketing. He left academia to start up and run three high-growth companies, including an $80 million runaway success story.

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