Shedding the Commodity Mind-Set
MANOZ
M A R K E T I N G
79
Shedding the commodity mind-set
John E. Forsyth, Alok Gupta, Sudeep Haldar, and Michael V. Marn
No product really has to be a commodity. The trick is to know what services your customers want—and to charge more.
C
ompanies that sell soap, perfume, candy bars, and other consumer products are expert at “decommoditizing” them: finding and capturing the value of intangible benefits and building strong brand names that can provide a kind of differentiation in the minds of consumers. But companies that sell products such as bulk chemicals, paper, and steel to businesses tend to be unsophisticated in these matters. Burdened by corporate cultures that emphasize operations and sales over marketing, many of these companies constantly strive to churn out more and more product more and more cheaply and then to sell as much of it as possible at the market price. Viewing themselves as commodity producers, they are particularly likely to overlook the nonfunctional features of their products—delivery speeds, after-sales service, and so on.
As a result of this mentality, such companies leave large amounts of money on the table. They would be far better off if they took a page from the playbooks of marketing-oriented businesses and embraced the—to them, unlikely—notion that buyers care not only about the price of a product but also about the way it is sold to them, the services that accompany it, and the nature of their relationship with the seller. If these manufacturers were to take that approach, they would find themselves thinking about their customer base not as they have traditionally segmented it—large and small, based in France or Germany, and so forth—but as composed of businesses that want
John Forsyth is a principal in McKinsey’s Stamford office; Alok Gupta is a consultant in the New York office; Sudeep Haldar is a consultant in the Chicago office; Mike Marn is a principal in the Cleveland office. Copyright © 2000 McKinsey & Company. All
M A R K E T I N G
79
Shedding the commodity mind-set
John E. Forsyth, Alok Gupta, Sudeep Haldar, and Michael V. Marn
No product really has to be a commodity. The trick is to know what services your customers want—and to charge more.
C
ompanies that sell soap, perfume, candy bars, and other consumer products are expert at “decommoditizing” them: finding and capturing the value of intangible benefits and building strong brand names that can provide a kind of differentiation in the minds of consumers. But companies that sell products such as bulk chemicals, paper, and steel to businesses tend to be unsophisticated in these matters. Burdened by corporate cultures that emphasize operations and sales over marketing, many of these companies constantly strive to churn out more and more product more and more cheaply and then to sell as much of it as possible at the market price. Viewing themselves as commodity producers, they are particularly likely to overlook the nonfunctional features of their products—delivery speeds, after-sales service, and so on.
As a result of this mentality, such companies leave large amounts of money on the table. They would be far better off if they took a page from the playbooks of marketing-oriented businesses and embraced the—to them, unlikely—notion that buyers care not only about the price of a product but also about the way it is sold to them, the services that accompany it, and the nature of their relationship with the seller. If these manufacturers were to take that approach, they would find themselves thinking about their customer base not as they have traditionally segmented it—large and small, based in France or Germany, and so forth—but as composed of businesses that want
John Forsyth is a principal in McKinsey’s Stamford office; Alok Gupta is a consultant in the New York office; Sudeep Haldar is a consultant in the Chicago office; Mike Marn is a principal in the Cleveland office. Copyright © 2000 McKinsey & Company. All