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How to Escape the Commodity Trap

(February/March 2017) posted on Tue Mar 21, 2017

Why do things become commodities? More importantly, how can you prevent your business from becoming a commodity? It all starts with understanding your customer.


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By Mark A. Coudray

The solution came through learning to optimize their purchasing process by understanding the data. This was before the days of big data, so it took a lot more work involving huge weekly data dumps into Excel spreadsheets and late nights of analysis. Ultimately, they were able to figure out what each store should buy for the week.

They changed their packaging method and packed orders for each store, saving time at the client’s distribution centers. They started looking at other factors like weather, temperature, where holidays fell in the week, and a whole bunch of other seemingly unrelated factors. They got so good at the predictive analysis that Wal-Mart granted them an exceedingly rare privilege – to be one of only 185 of their then-6300 vendors who would tell Wal-Mart how much to buy and at what price.

Eventually, Wal-Mart started sharing the sales data of their competitors to see if my friend could do better, and he always did. Of course, the company used this incredible competitive insight to outsell rivals in all the other markets where they competed.

And by the way, they were selling sunglasses made in China. The differentiation had nothing to do with the product.



Pulling It All Together
Everything in our lives eventually becomes a commodity, but you have options for how to deal with it. You can simply extend your offering, as Baskin Robbins did by offering 31 flavors, but this only works in the short term. Giving too many choices can actually slow a business down because the customer can’t make up their mind. At best, it’s only a temporary solution until the competition catches up and does the same thing.

The long-term solution is to stop thinking that you know what is best for the client. Perhaps you do, but when you assume that you know something, you close the door to awareness and lose the opportunity to see a new perspective. Instead, let the client tell you what they really want.

Get in their heads. Elevate the real reason to make the purchase with you. Appeal to emotions like trust, love, and happy memories. Try and create the ultimate, personal experience for them. Make them so delighted with the experience they can’t wait to tell their friends and order with you again. Strive to become the Disneyland or Cirque du Soleil of your specialty.

Read more from Mark Coudray or check our the rest of our February/March 2017 "Special Garment" issue.


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