PR is an excellent way of differentiation commoditized products and services in highly competitive markets and for explaining and giving credibility to those differences.

1. Differentiating commoditized Products with PR
May 2012
By Justin Pugsley of JJPAssociates
It's a fact that the vast majority of companies sell commoditized products and services –
few have truly unique and original business models. But that doesn't mean they need to
get caught up in a race to the lowest common denominator in terms of profits and in fact
many avoid such a fate.
In highly competitive industries where companies are selling commodity like products or
services public relations can play a key role for developing and reinforcing product
differentiation, which is so crucial for sustaining and building profit margins, to increase
market share and for economies of scale. The business world is full of examples of
companies, which through product and marketing innovation have managed to avoid such
a fate.
To achieve differentiation, marketing professionals typically employ a range of strategies
such as emphasizing better quality, higher levels of safety, superior levels of service, more
in-depth experience, a unique supply chain benefit, strong credit worthiness and so on.
Therefore creating a brand, which emphasizes such benefits, can be a very effective way
of differentiating a commodity-centric product or service. To be effective and to resonate
with consumers, a brand needs to be associated with qualities and attributes that
consumers value and feel are either worth paying extra for or are worth their loyalty – i.e.
repeat business and making recommendations to others.
More specifically, those values could be related to producing a product in a more
environmentally friendly way than most of the competition, a unique level of service, a
guarantee of some sort that is not common across the industry, better payment terms and
so on. Identifying, which qualities and attributes customers most appreciate and therefore
which ones should be focussed on, comes down to thorough market research.
Where PR comes in is to explain and accentuate those values in the market place, which
will hopefully define the organisation from most of the competition. That involves giving
interviews with targeted media outlets, whether it be traditional publishers or bloggers and
being on hand to comment in articles dealing with relevant topics to build up the correct
associations with consumers.
For instance, people are more likely to believe the value of a unique or unusual guarantee
if they read or hear about it from a third party media channel they regard as being
trustworthy. These days that channel could just as easily be a major news outlet, a
specialist publication or some form of social media, such as a recommendation from a
friend on Facebook or a tweet on Twitter.
Explaining clearly how that guarantee works, how it is possible and why it hasn't been
done before all ads to the credibility and believability of the offering and therefore supports
the marketing message and potentially makes it much more effective.
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2. PR & Product Differentiation: Premiumizing Palm Oil
Palm oil production in southeast Asia has developed a bad reputation with the public in the
West in that it is associated with the clearing of rain forest to make way for thousands of
acres of monoculture plantations – which hardly benefits the environment or plant and
animal diversity.
That image problem opened an opportunity for a different kind of palm oil producer to
make its product in a more environmentally sensitive way, often planting on scrub land or
taking over poorly run and mismanaged existing plantations and implementing
sustainability programmes.
Yet palm oil is an important ingredient in margarine, crisps, cereals, animal feedstuffs as
well as soap, washing powders and even bio-fuels and demand for the oil is growing
across the world.
However, it's all very well for a palm oil producer to advertise that it makes its product in a
sustainable way, the implication being that it deserves a premium for not destroying
pristine rain forests. The only problem is that the public is often sceptical of such claims
thinking: “oh they would say that” or “they're just jumping on the conservation bandwagon”
and at the very least want some third party proof of those claims. There are various Non
Governmental Organisations that can verify such claims, though such validations are of
great value, they're not enough.
Getting that story covered by the media, providing solid verifiable evidence that its
production is indeed done in a sustainable manner, carries far more weight with the public
than just seeing an advert that makes those claims. At the very least content provided by
neutral third parties – i.e. respected publications – gives the marketing and branding a lot
more credibility. The next stage is to stay in the loop in terms of the debate on these
issues, such emphasizing techniques for sustainable production and initiatives to help rain
forests, and gradually that will solidify that company's image as a responsible palm oil
producer.
By continuously driving that message home makes it easier for responsible palm oil
producers such as New Britain Palm Oil to sell their oil to multinational Fast Moving
Consumer Goods manufacturers such as Unilever and charge them a premium for doing
so – why? Because Unilever wants to show to their market that they source their
ingredients from responsible suppliers. For producers like NBPO there is the opportunity to
build relationships with such strong off-takers, drive economies of scale and sustain profit
margins.
Now there's a commodity called palm oil and a premium product called sustainably
produced palm oil, but both are basically still the same commodity. And by continuously
reinforcing to the public through PR the benefits to the environment and to rainforest
preservation of buying products made from sustainably produced palm oil actually helps
cement market position and reduces competition from those that don't produce palm oil in
a sustainable manner.
The huge value of PR is that by continuously reinforcing the message to the media helps
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3. highlight the need for buyers such as Unilever to carry on purchasing that product and if
necessary pay a premium for it, which it does. It's a classic case of PR not only supporting
the marketing, but actually giving it very considerable leverage and arguably helping to
create a premium for a commodity product.
PR & Product Differentiation: Charging A Premium For Cement
Another fascinating case study is that of Mexico-based international cement producer
Cemex. Cement is an exceedingly tough and competitive business and is about as
commoditized as an industry can get. Also, transporting already mixed cement is difficult
as it dries and the timing of demand from a project can be difficult to forecast as it is often
subject to delays or even weather related events.
From the late eighties Cemex tackled the problem in Mexico where communications are
challenging and traffic jams are notorious by developing fast and robust communications
systems to reduce waste and make sure cement could be delivered to its customers where
and when it was needed
This necessitated investing in satellite-based communications systems, greater
automation and linking customer order information all the way down the supply chain in as
near real time as possible so demand could be better anticipated and met. The system
was able to quickly check inventory levels route trucks with cancelled orders to other sites
where cement was needed and so on. In effect, Cemex guaranteed deliveries within a set
time frame, which became very popular with construction companies.
One of the problems the construction industry faced was having to wait for cement to be
delivered and while waiting would often have to pay work crews to stand around doing
nothing, it could also feed into expensive project delays. Such was the popularity of
Cemex's innovation in the Mexican cement market that it's clients were willing to pay a
premium for its product.
Cemex offered a supply chain or delivery advantage to its client base, which others didn't –
and as such was able to differentiate its product and even its brand i.e. looking more like a
solutions provider rather than a commodity maker. Naturally, it's a path most of the big
cement makers now follow. But PR can play an important role in communicating those
benefits to an industry explaining how end users gain from using it, showing how the
supply chain process was developed and why it is unique.
As for the media it is always looking for the next new story or trend. In the case of a
development like the Cemex one actually demonstrating to journalists from the trade
press, such as specialist cement and construction publications, how the whole process
works can be of enormous benefit to supporting claims of guaranteed delivery times for
example to a potentially sceptical audience.
PR & Product Differentiation: The Estate Agent's Conundrum
In the UK, the estate agent or realtor market is highly competitive and home owners are
typically charged a commission of 1-2% or even a flat fee on the sale of their homes, a
much lower rate than in other countries. Besides, there are many providers that for a
minimal fee allow home owners to market and sell their own properties – thereby cutting
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4. out estate agents altogether.
When it comes to marketing those properties many estate agents, particularly in London
and the south east of England, are faced with getting most of their leads for home buyers
from a highly successful property website called rightmove.co.uk. For many estate agents
rightmove.co.uk has replaced local newspapers as the main channel for property buyers.
The risk for an estate agent is to get caught in a pincer movement of rising marketing costs
and having to charge lower commissions in order to get business from home sellers.
Differentiation in this type of market, enough to charge higher commissions than rivals,
takes a lot of effort, and PR is an ideal way of communicating that superior offering.
In terms of finding properties to market, that often comes down to having a presence on
the high street, adverts in the local newspaper(s) and possibly local radio, a website and
direct marketing activities such as leafleting to households. Since it is the seller who pays
the commission it is important to convince this group of people over the value of the
services being offered and why they should pay a premium.
Some estate agents successfully differentiate themselves from the competition on their
local knowledge and their ability to find the right buyers, possibly through careful selection
processes, who are willing to pay market prices or sometimes more for properties. For
instance, a one branch estate agent run as a family business for several generations can
credibly claim to have an in-depth knowledge of the local market.
Where PR can reinforce that local expertise is for the nominated spokesperson to be on
hand to comment to the local media about developments, which effect the local property
market, whether it be related to local planning permission issues, moves in interest rates
and so on. A way of demonstrating to local journalists that willingness to be interviewed is
to quickly send them a news releases commenting on the latest developments, which
impact the local property market and also to have a news page for the releases with
contact details of the press spokesperson on the website. After a while journalists will
simply get used to contacting that person for comment – making the whole PR exercise a
lot easier.
That public persona can be further built upon if the editor of the local newspaper can be
persuaded to allow the estate agent to write a regular editorial column about conditions in
the local property market or give home owners advice on how to get the highest price for
their property. With local newspapers and sometimes even with local radio stations – a five
minute slot for example – this can be quite a successful strategy as these types of media
organisations are often cash strapped and need regular quality content.
This can also be done on a blog on the website with the posts e-mailed out to the list of
prospects on the mailing list. Also, sometimes a good blog piece can actually be turned
into a news release providing that it is topical to events in the property market.
All of this builds an impression of market expertise. However, it is critical that the content
provided contains useful information for readers interested in the local property market and
is not merely self-promotion – if it is, it will not be taken seriously or even read.
Other ways for a local estate agent to generate publicity is maybe to sponsor or back a
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5. local charity cause – if this can be done in conjunction with local media then all the better.
Yet another form of differentiation is maybe to go further than the competition in terms of
marketing properties – maybe via a video, clearer explanations, more better pictures etc...
all factors that could get more potential buyers through the door. Also, factors that could
deserve a higher level of commission for the estate agent. Most home owners would be
willing to pay a higher commission if they believe an estate agent can negotiate a higher
price from a buyer for their property as ultimately they'll be better off anyway.
PR & Product Differentiation: Living Up To Expectations
These days consumers are becoming increasingly sophisticated and well informed. It is
very common for people to first research a company on the Internet before purchasing
from them by trawling forums, twitter feeds and so on for comments from other users and
to get their experiences. Other people's experiences can form a major part of the decision
making process towards making or not making a purchase from a particular provider. Also,
links to articles tend to be shared in the social media arena to back a point or to share
some new or interesting information with the group, which is why an all round approach to
PR is important.
The growth of social media makes it even more crucial that companies 'walk the talk' in
that they live up to values and claims contained in their branding, PR and marketing. For
companies that really do practice what they preach in very competitive markets and that
offer genuine reasons for positive differentiation stand to greatly benefit from social media.
That also creates positive reinforcement of the brand.
Failure to live up to claims implied in the brand and made in the marketing will see the
company identified by prospective customers as being nothing special, therefore not
different, or worse hypocritical and dishonest, a message that could quickly spread on
social media platforms creating a very negative form of differentiation. Companies which
do live up to their values and marketing claims also find it easier to defend themselves
when faced with criticism. They also find it easier to apologise and rectify the cause of the
problem when they are wrong.
For companies which do create a differentiator of some sort, PR can be very useful for
talking down the competition – something that is not well suited to advertising. This can
come down to explaining to journalists that the company has developed a competitive
advantage uncommon in the industry and invite the media to investigate that claim.
Indeed, a report in a trade publication writing about the superior performance of product A
over B is far more credible to readers than if the maker of product A makes that claim in an
advert.
Another tactic often used by large well known firms is to 'leak' details of an upcoming
innovation or new product and create a buzz and excitement – car manufacturers do this
regularly ahead of the launch of a new model. Often these deliberate leaks (or scoops to
journalists) are made to a well known blogger or journalist and that in turn is picked-up by
the rest of the media and soon it turns into a debate and speculation over the nature of this
product and when it will be launched. It helps drive anticipation and creates an audience
hungry for more information ahead of the official launch 'when all is revealed.' But be
careful not to over-hype and create disappointment.
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6. Also, the media is increasingly fragmenting, a necessary response for sifting and dealing
with the huge and growing torrents of information that is easily available to most people. In
some ways this is good as it can make it easier from a PR perspective to reach more
targeted audiences with a specific messages. The downside, particularly for mass
consumer brands, is that it is potentially more work to spread the message out to the
greatest number of people and there is a risk that different messages to different
audiences could sow confusion as to what the brand really stands for and to whom the
product is aimed at.
Differentiation is crucial for the long-term profitability or even the survival prospects of most
companies competing in highly competitive markets with commoditized products and
services. Ideally, the positive qualities associated with that differentiation should be
mirrored in the brand and PR can play a vital role in bringing that about.
For more reports: www.jjpassociates.co.uk
Email: justin@jjpassociates.co.uk
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