One of the worst nightmares for a brand is to find out its unique proposition is now considered merely a given by consumers.
Consider the case of Brand Y, which built its franchise on a reputation for good quality, consistency and safety. Suddenly consumers have come to expect those attributes in products across the board, which leaves this brand devoid of a special selling point.
The brand's former loyalists are now far more educated about competing products because of the Internet. They have more private-label choices available, which drives down margins and prices for everyone, including Brand Y.
These challenges were outlined recently by Ira Kalish, director, Global Economics and Consumer Business, Deloitte Research, in a thoughtful presentation at the Executive Forum of Portland State University's Food Industry Leadership Center. Kalish stressed that consumers have developed a “commoditized attitude” about products. They may spend for innovative items such as iPods, but they view many other things as interchangeable.
Retailers of all stripes have recognized these consumer shifts and are already moving to react, Kalish noted, citing examples from numerous channels of trade. Lowe's has built share in the home improvement business by gearing its products and messages to women. Kohl's has differentiated by placing traditional department store merchandise in a discount store environment. Starbucks sells commodity products with a unique in-store experience.
In food retailing, many supermarkets are finally embracing lifestyle-oriented formats, along with niche and local marketing. Are they getting the support from suppliers that they need?
Kalish argued that suppliers have more work to do. “Suppliers need a willingness to take more risk and place bets,” he said. “They need niche products for niche retailers.”
That means going farther down the path of lifestyle and values marketing with approaches that are geared to attributes such as health and nutrition and social responsibility, he said. It also means pursuing nontraditional marketing outlets, such as online consumer networks.
All of this advice represents a good wake-up call for brands that haven't come to terms with these challenges. The only problem I see is that suppliers can pursue these suggestions and still run into the same commoditization problem they started with.
Let's say, for example, that Brand Y, seeking new directions, decides to embrace social responsibility as a core strategy. Does that initiative give the brand a point of difference?
Not necessarily, according to another speaker at the PSU event, Dirk Davis, vice president of marketing, Unified Grocers.
“Everyone is dealing with the green issue,” Davis said. “So more companies will be judged by what they are not doing. The expectation is that you will address it.”
So an attribute assumed to be special, social responsibility tied to the environment, is increasingly seen as a given in the marketplace. My point is that commoditization is a moving target. Brands and retailers need to identify when a product or service crosses the line from unique to commodity, and how to respond when that happens. Honing that skill will make all the difference.