Why would I ask such a silly question? Well, there is so much being written about differentiating your products and services that it is not completely unreasonable to think that some people will even wonder if a commodity can create customer value.
Let me use a brief story to illustrate my answer (which is a strong YES!)
My daughter is the Accounts Receivable Manager at a large public B2B company. She manages the collection of over 100,000 leases. She and her team focus on a large but manageable number of open balances at all times. And they all use binder clips to keep their notes and other information organized. Without their binder clips, they would have major confusion. Yet, she does not know the brand of the clips she uses nor how much they cost. When she needs more, she goes to a supply room and takes a box.
Her binder clips are probably the ultimate B2B commodities. Yet, they help her achieve her required business outcomes better than any other alternative she has seen. And she is not actively looking for a replacement since they do what she needs done. It is for these reasons that the clips have been around since 1910.
Technically speaking, my daughter is an end user. She is not the purchaser. In this case, the purchaser of the clips is the facility Office Manager. She buys the clips, and the rest of the offices stationery needs from a distributor who does not offer a commodity service. They offer a differentiated service. Orders can be placed by phone, via an app., and through a web site. Delivery can be same day or other. The delivery person can put the items in the storage area or leave then for the office manager.
To summarize, the end user of the commodity gets real value from the product and has no choice to make. The buyer get value from the distributor and has choices of ordering channels, delivery options, and probably some payment options but again does not choose (or care) the manufacturer of the product. This is typical of many commodity product or services relationships. And they work. But there are also potential problems caused by getting certain signals crossed.
According to John DeVincentis and Neil Rackham in their book “Rethinking the Sales Force: Redefining Selling to Create and Capture Customer Value,” there are three types of buyers:
- Those who believe there is intrinsic value in the products and services. This means that all the value the buying business can extract from the product and acquisition process comes from the product. Essentially, they believe that everything should be treated like buying binder clips.
- Those who believe there is extrinsic value in the products and services they buy. This means that the products and services are not commodities but are differentiated and that much of the value the purchasing company gains comes from the actual buying process. They value their time with the sales people.
- Those who believe that some products and services have so much potential to create value for the buyer that they want to enter a high level, strategic relationship with a partner. They are will to reconfigure their whole business in order to get the extra value. Think about the medical community working with IBM and Watson to come up with improved cancer treatments.
It is the duty of the purchasing gatekeeper to accurately assess the type of buyer they have to be when dealing with each potential supplier. If they want to buy Watson’s service the same way they buy binder clips, the whole thing is doomed to fail. Likewise, if they want to do a whole evaluation of the binder clip market, for whatever reason, they should be put in the penalty box unless they work for Staples or any of the other big box sellers.
If you are selling your company’s services, it is your responsibility to make sure you know how you want to interact with the buyers and then to ensure the relationship is developing properly. Do not leave it to chance.
Commodities create value for your customers but not necessarily for your business. Differentiated products and services, which create positive customer outcomes, add value for customers and your business. Ultimately, this should be your objective.