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5 Smart Ways to Avoid the Commodity Trap

To establish your platform and to position yourself as an expert, I recommend taking five simple steps.

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When you start a business, you have to be careful that you don’t fall into a trap — the “I am just like everyone else” commodity trap. To understand this dilemma, it’s important to know that a commodity is:

  • A mass-produced, unspecialized product.
  • A good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (i.e. brand name) other than price.

Most small businesses will want to avoid this at all costs. Using one of my favorite brand’s as an example, I’ll explain why.

 

How Strategies Impact Positioning

Although I love the department store Macy’s, while they consider themselves to be a mid-range to upscale chain, for many customers (including myself) they aren’t really seen as a high-end retailer. Maybe this positioning works for Macy’s, but as an entrepreneur, you don’t want to follow their business model and here’s why:

Every week, like clockwork, Macy’s conducts a one-day sale and a preview day. On either the sale or preview day, shoppers can score savings. Once I caught on to this, I stopped shopping at Macy’s unless they were having a sale. If you are a loyal Macy’s shopper, you love this because you seldom have to pay full price for your wares, but if you are an entrepreneur building a business, I hope you understand the lesson here.

Macy’s sales strategy has positioned the retailer to never stand out in the marketplace as an exclusive, high-end retailer of fine goods because every week customers can get what they want on sale. Macy’s, “as a retailer that primarily serves the middle class, it can’t raise prices the way a Saks Fifth Avenue and a Nordstrom (which have wealthier clientele) can,” according to Kiplingers.

For a long-standing company with established market share and sales to the tune of $26.4 billion in 2011, this strategy can work. But for most small businesses, that aren’t in the daily deals business, it is the kiss of death. In the customer’s mindset, if you are always having a sale, the value placed on your offering decreases substantially.

 

Create Expert Brand Status

When you commoditize your personal brand or your company’s offering, you will not be seen as a thought leader, expert or must-have need by consumers.

Unless you sell paper clips, I assume like most entrepreneurs, you would like to be recognized as an industry expert and thought leader. So, in order to establish your platform and to position yourself as an expert, I recommend taking five simple steps.

 

1. Determine core competencies.

If you are after expert status, you can’t be a jack of all trades. Instead you must be known for a few specific things in the marketplace. If you have trouble determining what you’re best at, you should identify several strengths, choose those you excel in, and conduct research to see which platform offers the most viability. As a personal rule of thumb, look to have a maximum of five core competencies.

If you are unsure, ask current or previous clients and customers. This can be a huge eye opener as to whether what you’re intending to share is actually being received.

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