It may sound like a diabolical threat by an evil economist, but “death by commoditization” is not only real, it poses a never-ending threat to the decorative plumbing and hardware industry. Commoditization is when goods or services become so widely available and indistinguishable that the only differentiating feature is price. That’s a slippery slope to irrelevance for anyone trying to make a living selling value-added decorative product.
By allowing the specification process to focus primarily on price, we hurt ourselves in at least two damaging ways: One, we diminish our role as “expert.” As alleged purveyors of the latest and greatest products the decorative plumbing and hardware world has to offer, we relegate ourselves to peddling commodities. If Mr. or Mrs. Jones can easily find the same products elsewhere and for less cost, what are we bringing to the mix?
Two, selling commodities instead of value-added decorative product usually translates to lower margin sales, and lower closing rates of those sales. That is, to keep your customer from purchasing the ubiquitously available product elsewhere – including on the Internet – we often end up having to cut prices below what the showroom can sustain, or we simply lose the sale as our prospect leaves to buy elsewhere.
While it’s true that some commodity-driven showrooms can survive during boom times, I’d argue that this is the proverbial case of a rising tide raising all boats. The 2008 recession was a painful reminder of what happens when your sale becomes mostly about price. In addition to some showrooms going out of business, too many manufacturers lost their way by shifting their product mix to feature more mass-produced, commodity-type product. And I would wager that most of them have still not returned to the annual revenue they enjoyed pre-recession. Some, sadly, have withdrawn from the market altogether. In contrast, the manufacturers that focused on bringing innovative and differentiating product to market not only rebounded, but flourished.
So how do you combat the dreaded commoditization? One word: Innovation.
DEFINING INNOVATION
Innovation is perhaps the most overused buzzword in business today, but there’s very good reason for that. As the celebrity scientist Neil deGrasse Tyson once bluntly put it: “One of the symptoms of an absence of innovation is the fact that you lose your jobs. Everyone catches up with you. They can do what you do better than you or cheaper than you.”
Unfortunately, the term “innovation” is not only overused, it’s also regularly misused. Innovation is not simply a synonym for “new.” A new faucet or tub design may be fresh looking, but it is not necessarily innovative. Innovation means you’ve taken an existing product or service and enhanced it to the point that you’ve changed the nature of the product itself.
For example, the iPod was innovative because it literally changed the way we listen to music on the go. Prior to the iPod, people were bopping along to the Sony Walkman, clunky cassette technology and all. Then, faster than you can say “sell my stock in Sony Walkman,” the iPod became the new standard in mobile listening. Admittedly, the ultimate definition may be subjective, so perhaps I should take the path of Potter Stewart, the Supreme Court Justice who, when asked to define “obscenity,” declined and simply stated, “I know it when I see it.” In the end, I believe most people agree that an innovative product must dramatically improve upon the design and create truly significant market impact. It is disruptive to whatever is currently the standard.
Fortunately, unlike a commodity, an innovative product enables you to focus less on price and more on the cool value-added features. Translation: Customers are more apt to pay a premium. Further, you enhance your “expert” pedigree by your association with the product, as most customers appreciate your help with their purchase of such a cutting-edge product. Call it appreciation by association. That can bring in referrals.
One current example of a truly innovative product would be blended, eco-friendly concrete sinks – incorporating natural materials that make them lighter in weight, yet extraordinarily stain-, scratch- and crack-resistant. Another is the zero-clearance pop-down drain, which eliminates ugly protruding stoppers, lift knobs and the entire cumbersome pop-up assemblies that come with standard sink drains. And here’s a third example: dual-function towel rails that allow you to insert soap dispensers and dishes, toothbrush tumblers, etc. By evolving the towel bar into a bathroom organizer, they exude some innovation mojo.
Of course, there are plenty of examples of older products that were initially innovative and still worthy of focus, yet are rapidly descending into commoditization. The decorative shower drain may be the poster child for this. In 2010, only a handful of forward-thinking manufacturers produced this innovative twist on the ugly, utilitarian shower drain that plagued fine shower enclosures everywhere. Now, as is the insidious nature of commoditization, virtually every faucet and drain manufacturer touts its own knockoff version. And guess what happened to the price?
Perhaps the best exercise is to figure out what the next great innovation is and try to get ahead of the curve. Digital shower interfaces are rapidly entering the market and may be worthy of consideration, but personally, the current ones feel gimmicky because they lack a killer app that would give them innovative status.
At the end of the day, the market will determine what’s truly innovative. What’s important is to constantly align yourself with value-added products that help differentiate your firm and offer premium goods to your customers. Even if they are not technically innovative, they can still help you combat commoditization.
But innovative products are just one tool available in our battle. Innovation can also apply to marketing and sales strategies.
SHOWER FIRST
Conventional wisdom in the kitchen and bath industry dictates that when you specify a bathroom for a customer, you start with the lavatory faucet. While both intuitive and backed by decades of “that’s just how it’s done,” this is also a perfect example of leading your sale with a commodity.
With few exceptions, lavatory faucets today are about as commodity as you can get. No sooner does a new lav style come out, then it’s copied by nearly every manufacturer.
The impact? Your customer needs you less. First, most customers don’t need you to tell them what their taste is. They can figure out what style they prefer by simply looking at the lavs that line the showroom walls. Once they select the style they prefer – assuming they haven’t already done this online – they can easily waltz out and price shop it (or do it right there on their smartphone!).
But if you start your specification with the shower, you immediately entrench yourself as the expert. Properly specifying a full luxury shower is not for the faint of heart and it is probably the most intimidating part of the process for your customer. How many applications can we install and still remain within the water-efficiency codes? What are the pros and cons of installing a steam unit? Should I put in a square drain or go for a linear drain? How does each choice impact the aesthetic I want to achieve? And what the heck will each do to my budget?
The typical customer has no clue how to navigate these questions, and unless they’re a die-hard DYIer, Googling for answers will prove wholly insufficient. They need a design professional to guide them through the process. Moreover, now that you’ve hopefully bonded with your client and rightfully gained their trust, it makes it emotionally harder for them to take the specs of your professional labor and shop elsewhere. Will that still occasionally happen? Of course. But it won’t happen nearly as often as when you start with the lav.
Finally, it’s virtually impossible for Internet-only companies to provide the shower expertise, guidance and emotional reassurance that a capable showroom consultant can. As a result, the complexity of shower specifications provides showrooms with a big competitive advantage over the Amazons of the world. Jeff Bezos may own most of the world, but we still own the shower.
Commoditization doesn’t have to be fatal. Truly embracing innovation and differentiation, both with product and sales strategy, can provide helpful antidotes.
Noah Taft is senior v.p., marketing & sales, and a principal of California Faucets, a custom manufacturer of fine faucets and accessories for both the kitchen and bath. Taft is also a co-principal of Dezi Home, an innovative new accessory company.