2. Why ?
How to turn commodities into branded goods ?
Commodity:
- product & market – lowly differentiated products or
services with high levels of substitutability and straight
forward price discovery.
Over decades:
Efforts on slash costs, eliminated marketing capabilities.
Instead:
Understand customers, needs, devise and communicate new offerings.
3. Approach to Brand Commodities
1st –Carve up the market
2nd -Differentiate
3rd - Bundle
4th - Deliver
4. Carve up the market
Processto identify the right set ofcustomerwho need ,appreciate and will pay
for the differentiation.
Who will pay for the differentiation ?
How much can be invested in differentiation
process ?
What benefits are of value to their customers ?
5. Three distinct class of customer
1. Gold standard customer
Small portion, 5 to 25 % of total market
Long term strategic partnership with multiple level of clients
Pay premium, example - Australian Wheat Board
2. Potentials
Large segment, 30 to 45 % of total market
Interest in partnering although shy away from the long term
commitment
Potential for differentiation exist
3. Incorrigibles
Not strategic thinkers
Not going to love you, no matter what you do
Pure price buyers
Waste of time to market
Understanding not only the needs of the direct customer, but the end user is
important as well. The end customer are also called as true customers sometimes.
6. Differentiate
Commodities differentiation must be tangible,
robust, and capable of withstanding intense
scrutiny.
Two ways to differentiate:
1) Adding value- convenience, customization and
consistency.
2) Delivering value - Through product or service
enhancement
8. Differentiation …
1) Quality control -Value from product consistency
2) Reliability - Value from consistent service, e.g. - Dow
Chemical Company
3) Packaging - Value from product convenience, e.g. - Spice
producer
4) Taking Responsibility - Value from convenient
service
5) Matching - Value from product customization, e.g. - Wheat
6) Knowledge based applications - Value from
customized service , e.g. -Mogul's
9. Bundle
Bundle the multiple source of differentiation and prevent the
competitors from unbundling them.
Brand identification with a bundle of integrated offerings,
extend the brand relation to institutional level(company’s
reputation for innovation, reliability and stability).
Institutional branding create customer relation more broadens
and deep
In commodity brand relationships, emotional bonds are
replaced by shared and common goals.
10. Company to company contact as both partner seek a way to
create value through processes, applications and capabilities.
- Both focuses on relationship rather than transactions,
on offering rather than products and on premium rather than
discounts.
The effective communication, using economics rather than
emotion , is the must in commodity marketing.
E.g. When Alathon was able to communicate that 25 resin was
5% more durable than competitive products , they were able
to increase the price by 7% ,resulting in an overall premium of
nearly 38%.
11. Deliver
Execution is critical-Business systems and processes required
to deliver market offering.
The value has to be real and tangible because they will
constantly measure and reevaluate it.
Pogo Principle - "We have met the enemy and he is us"
Consumer pay a same price is a myth.
12. Pricing principles on Marketing
Branded Commodities
First- Aware of true cost of differentiation
Second- Command value for small business
Third- Understand value of offering customer's operation and
ability to switch
Fourth- Do not allow differentiation to be unbundled
Fifth- Prepared continuous and complex trade-offs between
volume and price.
Sixth- Maintain market discipline
