How to Differentiate Components in a Commodity Market

How to make commodity parts stand out in the market

In this interview, Joseph Lewin from CADENAS PARTsolutions speaks with Stefanie Casimir. Stefanie is the Global Product Marketing Manager for ABB Nema Motors and has 20 years of experience in industrial marketing. She’s done everything from marketing communications to strategic marketing, and now she’s focused on product marketing in manufacturing.

What are commodity parts?

Commodity parts are components with no differentiation between competitive products, or components that the market cannot easily distinguish among when comparing brands. 

Typically, commodity parts have some government regulation that determines a particular component type’s size, mounting configuration, or outputs.

Commoditization makes it challenging to stand out in the market and often drives prices and margins further down.

How do you position a commodity product?

There are a few key ways to position a commodity product. These focus primarily on product marketing, as opposed to value selling:

• Pricing
• Availability
• Country of origin
• Brand reputation
• Relationships with channel partners

Pricing

Pricing is a critical factor in positioning a product. Is the product you offer a low-cost item? Is it the cheapest option? Is it a premium product?

Figuring out pricing is no easy feat. Price will affect your ability to sell your products, but it also goes a long way in positioning your product in prospects’ minds.

No pricing strategy is necessarily better than another. But if you are trying to price the cheapest component to sell into a luxury car, you may underprice yourself out of the project. On the flip side, if you price a premium component to sell into items with a short lifespan, you probably won’t beat out low-cost competitors.

Availability

Product availability has always been an essential part of any go-to market strategy, but since 2020 it’s become a primary consideration for specifiers. If an engineer orders a part for a job with a looming deadline, but the part is stuck in the Port of LA for three months, that will be an issue.

Country of origin

With global supply chain issues and geopolitical conflicts, a part’s country of origin can also be an important differentiator. Manufacturers with products made and warehoused in the USA are now at a more competitive advantage than in years past.

Brand reputation

The marketing world often throws the term “brand” around carelessly. 

A brand is essentially the amount of trust a company has earned in the market. Long-standing brands like ABB have a clear competitive advantage because they have built years of trust in the industries they serve. When a component is crucial to a multi-million dollar machine, trust goes a long way.

The real advantage of a strong brand is that it helps to insulate large companies from a competitive startup. Unlike more established brands, new companies do not have a long track record of success and the crucial trust that comes with it, making newer companies and startups a risky choice. 

Relationships with channel partners

Having channel partners such as distributors and vendors is also a competitive advantage. Many of the more prominent component manufacturers enjoy a substantial market share in part due to their robust channel partner relationships.

What can smaller manufacturers do to compete?

There are several ways small manufacturers can position their commodity products while ramping up brand reputation and channel partner relationships.

• Find a niche to own
• Focus on value selling
• Don’t go head-to-head with the big manufacturers

What’s the process for deciding on a go-to market strategy for commodity products?

You know you need to use a combination of the five principles above, but how do you decide which to use?

Doing research is a vital step in developing a go-to market strategy.

Internal research

It starts with internal research. Here are a few things to consider as you look at your portfolio of products:

• Can we drive down costs?
• What’s unique about this product?
• Largest inventory?
• Does this help our portfolio or hurt our portfolio?
• Could we make a story around the product?

One of the best ways to answer these questions is to speak with your internal team. Speak with sales, product development, customer service, and even finance.

As you speak with your team, look for the types of products that will help your brand.

External research

Next, it’s essential to invest in external research

• Speak with your sales channel partners (distributors)
  • If they can’t fit a new product into their lineup, it may be best to scrap the idea
• Visit customers or prospects to learn where there is a pain in the market
• Look at what your competitors are doing to see if they have traction with a similar product
• Look across industries to find new ideas for positioning your offerings

Once you gather your notes from your internal and external research, specific themes will surface. Use this information to position your product using the five product marketing tools above.

Product Marketing in Action – ABB’s EC Titanium motor

Stefanie Casimir shares an example of product marketing in action:

“We recently launched a motor called the EC Titanium,” Stefanie said. “It’s a highly efficient motor. You pair it with a drive, and you save all these energy costs.”

“It’s not that we’re the first ones that came up with this motor,” Stefanie continued. “There’s a lot of other motor manufacturers out there and tech companies that want to save the world. You have these Silicon Valley companies that try to come up with these big ideas on how they’re going to save the Amazon Rainforest and stuff with their motors.”

“Brand reputation is important. They just don’t have a position in the market that is similar to ours. You know, you can’t just pop up out of nowhere and say, ‘Hey, I have a great product’ without the right sales channel strategy, for instance.”

Stefanie concluded, “You may have a grand idea, but if you don’t have a means to reach the market, a go-to market strategy, or a brand reputation to stand behind, it’s going to be hard to push a product. This product, EC Titanium, is not a brand new idea. There are other efficient products out there.”

“At ABB, we’ve established ourselves as a reputable motor manufacturer in the U.S. We have number one market share within the NEMA market here in the U.S. And so when we come out with a highly efficient product, and we have a very differentiated strategy behind it, it holds clout. And has a reputation behind it.”