Selling a commodity can be brutal. For both products and services.
You're replaceable and forever at risk of being undercut.
Here's a framework for creating a product that stands out and that people love.
(Not despite it tasting awful, but because of it.)
Commodity vs Unique
First: Uber drivers are a commodity.
You don't really care which one you get. You just want to get somewhere quickly, safely, and cheaply.
Airbnbs are unique.
The unique properties of an Airbnb make or break a vacation. You really care which Airbnb you’re staying in.
(Ask yourself: If a stranger booked an Airbnb for you—wouldn’t you be worried?)
As a commodity, you can only compete on:
Price (cheaper?)
Availability (now?)
Quality (better made?)
Brand (do they like you better?)
Marketing (do you sell it better?)
Whether they decide to buy from you depends on each individual's weighting of 👆 that specific day.
For example
If you sell plumbing supplies, and someone desperately needs those supplies TODAY then they'll compromise on cost, brand, and quality for immediate availability.
They'll optimize for something else if it's not a rush.
Just like if you’re desperately trying to make it home for Christmas, you’d book an absurdly expensive flight with your most hated airline and even sit in a middle seat.
If unique: you compete on way more metrics.
Each Airbnb competes over:
Location
“Coolness” or “Vibe”
Price
# of bedrooms/bathrooms/beds
Where the beds are located
Decor
Accessibility
Amenities (hot tub anyone?)
Pet policy
Ratings + reviews
Amenities
House style
Availability
Again, each person will have different preferences depending on the type of trip their taking. More Airbnbs that are better in various ways can be added to the market, but some people will still choose you because they value your unique combination of variables more than others.
But the thing that will guarantee you bookings is if you’re super unique:
Basically what I’m trying to say here is:
Do not launch a commodity, be unique
Often it becomes a race to the bottom in prices. And it's a constant battle to maintain. You can be undercut if someone figures out a process that's faster or better than you.
Examples:
1. Ghostwriter/Copywriter/Artists/Designers/Ads Marketers/Programmers
If you offer the same old services above as everyone else, if someone else can leverage AI to create content, they can charge less and deliver faster.
2. Miners/Manufacturers/Suppliers
If someone else can extract raw materials, or create finished products faster and cheaper, they can charge less or deliver faster.
It's very difficult to penetrate a market and defend your position as a commodity.
Coca-Cola
Coca-Cola has dominated the ultimate commodity arena for a long time. How?
1. Marketing & Brand. They spend $4B per year on advertising.
2. Distribution. You can buy a Coca-Cola anywhere in the world.
3. Production (and cost). They make insane quantities so can outcompete on cost. You also perfectly know what you’re gonna get when you buy a Coke.
4. Diversification. They know tastes shift and are regional. That's why they don't just sell one product. They have 400 separate brands.
5. Acquisitions. They buy up small competitors before they become a big problem.
Maintaining Coca-Cola’s dominance is insanely difficult.
Competing with Coca-Cola by making a brown, carbonated, caffeinated, sugary beverage is even harder.
Compete by being new and unique
In the book Alchemy, Rory Sutherland talked about how one might compete against Coke. You might logically try to compete by doing:
Larger can
Lower cost
Better taste
And you’d be laughed out of the room if you suggested:
Smaller can
More expensive
Tastes awful
But that’s exactly what Red Bull did.
They created a new category that was completely unique at the time: energy drink.
Red Bull’s small size, increased cost, and weird taste were critical to its success:
For you to believe its potency you have to put it in a small can so people think that it’s so potent that it’s unsafe to drink a normal-sized can.
For you to value it, the potent ingredients should make it cost more than a regular soft drink.
And for you to believe it has those potent ingredients, it should have a weird medicinal taste (like Buckley’s “It tastes awful, but it works.”)
Yes, everything becomes commoditized
If someone has a good idea, there will be a horde of copycats.
Guaranteed.
Of course, Red Bull is now one of many energy drinks. It emerged as a unique offering and is now operating in the commodity space.
But they’re still the number one seller.
That’s because they got the first-mover advantage. And now they have the ability to defend themselves against copycats just as Coca-Cola defends itself.
So create something unique
Don’t create a business that already exists.
Don’t launch another Hotel booking site.
Take an industry or product and completely flip it on its head.
Instead, launch a marketplace for people to stay in strangers’ homes.
The idea should seem a bit loony at the time.
Some people should think it’s dumb or crazy.
Like digital money, staying in strangers’ homes, getting in strangers’ cars, terrible-tasting and expensive soft drinks, and computer-generated images.
But that might just mean you’re onto something
Cheers folks!
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– Neal