The "Commodity" Mindset Is Killing Your Margins—Here's How to Escape
If you think your product or service is a "commodity," you've already lost the pricing battle before it begins—the only actual commodities in our economy trade on exchanges. As you'll read below, in the case of coffee beans (traded on an exchange), there's still an opportunity to differentiate on the downstream experience. To call anything else a "commodity" is a failure of imagination and strategy. Here's how to break free from commodity thinking and capture more value through more innovative pricing.
The Myth of Commoditization
When I hear someone say, "But I sell a commodity," I hear, "I've stopped trying." This is a dangerous excuse, disguising a lack of innovation, creativity, or courage to challenge the status quo. In today’s market, very few things qualify as pure commodities.
Let's Debunk Some "Commodity" Myths:
Myth #1: Electricity is a Commodity. Electrons may be indistinguishable, but the customer experience, reliability, billing transparency, and green-energy certifications turn electricity from a commodity into a premium offering. Texas’s recent energy crises proved that customers willingly pay more for reliability and stability. Green and renewable options demonstrate clear differentiation—proving that electrons aren't just electrons when branding and values enter the equation.
Myth #2: Web Hosting is a Commodity. When AWS commoditized cloud computing, the standard narrative was that pricing power evaporated. Yet platforms like Netlify and Vercel thrive by focusing on seamless developer experiences, unique integrations, and tailored workflows. They've identified user needs and built specialized features that command a premium.
Myth #3: Coffee Beans are a Commodity. Coffee beans trade on commodity exchanges, but brands like Starbucks don’t sell coffee—they sell an experience, a moment in your day. Specialty roasters differentiate through origin stories, ethical sourcing, and innovative roasting methods. The product itself barely changes, but the perceived value multiplies.
Finding Your Differentiation
Escaping the commodity mindset is simpler than it seems. Start by asking these critical questions:
Customer experience: How can you make purchasing frictionless or enjoyable?
Reliability and trust: Can you guarantee a higher level of service, consistency, or predictability?
Ethics and values: Is there a story around your sourcing, sustainability, or community impact?
Personalization: How might your offering be customized to customer needs?
Logistics and delivery: Are you faster, more convenient, or more reliable?
Education and expertise: Can you offer unique insights or support that no competitor does?
Evolving from the "Commodity Mindset"
Next time you think you're trapped in commodity pricing, reframe the issue:
Instead of "I sell a commodity," say, "I haven't yet found my differentiation."
Instead of settling for scraps, look for ways to add value, even subtle ones.
Identify pain points your competitors ignore. When you tackle problems differently than competitors, you have differentiation.
You have untapped pricing potential if you can find the market segment that values that differentiation.
Reject the commodity mindset, embrace differentiation, and reclaim your pricing power. Your margins—and your customers—will thank you.
