How Commodity Products Can Be Differentiated by Customer Experience Innovations

| Management, Marketing

Diane and I celebrated New Year’s Eve with our friends Kevin and Teresa. Kevin and I got to talking about how products categorized as “commodities” because they are not significantly different from their competitors’ products actually can create extraordinary differentiation. Kevin became wealthy with his idea that every Behr paint store should have the technology that enables prospective customers to bring in a color sample and be able to match it exactly to a mix of paint colors to achieve their desired result.

Kevin, who is a relentless perfectionist, was completely uncompromising in wanting to give his customers an extraordinary paint product experience that solved a simple but important problem brilliantly. He says that he used to tell his management team that they had two years to perfect this strategy because much bigger competitors might quickly understand the implications of what Behr was up to – but big companies just can’t move quickly. (This, by the way, is because most big companies empower their middle managers to say “no” while not giving them authority to approve “yes.”)

I recall an analogous situation when I was a young marketing VP at Pepsi. In 1970, Pepsi was way outsold in the US by Coca-Cola, which at that time was the world’s most important brand of anything. At Pepsi, we came up with the insight that as many ounces of beverage as we could get into the consumer’s household inventory would all be consumed within a week. The implications of this simple observation were to be game-changing.

Before becoming Pepsi marketing VP, I had headed up PepsiCo’s corporate R&D and we had been developing the first plastic beverage bottle. It was small and quite beautiful, but this new insight led to our shifting all our resources to developing with duPont a 2-liter PET plastic beverage container. We launched the new package just as WalMart, K-Mart, Walgreens and CVS decided they wanted to start selling soft drinks – which turned out to become their highest profit product, other than their pharmacies. The mass merchandisers loved the 2-liter bottle because it would not break and mess up their stores, as glass containers were notorious for doing.

Coincidentally to Kevin’s experience, it took two years before The Coca-Cola Company responded with its own plastic beverage container. By then, Pepsi had made huge gains in market share and AC Nielsen had given us an award for the longest uninterrupted market share increase of any of the 40,000 consumer package good products it tracked.

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