In today’s “look-alike” marketplace, business owners must find ways to differentiate, innovate, connect to
customers, and deliver value. An interesting logo, catchy mission statement, or the digital marketing spin
you put on the same service or product you’ve had for years won’t cut it.
If you promise something different and then give everyone the same experience they know from past
exposure, you’ll compete largely on price alone. If you don’t think and act differently, you’ll behave your
way into commoditization. Commoditization is the process by which something becomes
undifferentiated, where consumers reduce their buying decision to the lowest common
denominator—price.
Take Coffee for example. Coffee is the second most traded commodity in the world. Approximately 1/3
of the world’s production comes from Brazil with the Arabica variety representing 70% of worldwide
production. Unroasted “green” coffee beans are bought and sold on the commodities markets across the
globe. This “green” coffee, in pure commodity form yields an average of $2.17 per lb. on the open
market.
The green coffee bean is then roasted transforming the chemical and physical properties of green beans
into coffee products. The majority of roasting is done commercially and then sold to the distributor for
retail sale. Within this segment there are also sub specialty roasters that cater to “single origin” coffees
serving specialty markets. The commercial roaster sells to the retailer at an average $7 per lb. The
retailer then sells to the consumer for approximately $12 a pound.
The roasted coffee bean can also transform into a service. The typical coffee shop uses 4 oz. of roasted
beans to generate a 64 oz. pot of coffee. If the average convenience store or quick serve coffee shop sells
an average 16 oz. cup that would equal about seventeen 16 oz. cups of coffee per brewed lb. If we used
the McDonald’s 16 oz. average cost of $2.49, the gross sales would then equate to a yield of approximately
$42.33 per lb.
Enter Howard Shultz and the evolution of the bean’s value proposition transforms into yet another
dimension - experience. Armed with a mission to, “inspire and nurture the human spirit – one person,
one cup and one neighborhood at a time,” Starbucks has grown to over 32k locations worldwide with a
market value of over $86.7 Billion. Using the average 17 cups per brewed lb., that would equate to a yield
of $76.50 a lb.! 2 daily Grande Café Americanos at Starbucks will cost $270 a month, $3,240 a year and
$97,200 over 30 years!
The second most commoditized product on the global market, the coffee bean, transforms from a yield of
$2.17 to $76.50 a lb. through the phases of commodity – product – service – experience. Where do you
fall within this value stream within your own business? Margin erosion, declining market share, non-
recurring revenue streams, and higher customer turnover are all tell tale signs it may be time for check
up.
Escaping commoditization requires a shift in your thinking and the way you look at, and value, employee
and customer relationships and overall customer experience. If you don’t want to be another commodity,
you need to evaluate your culture, re define your value propositions, and focus on your overall customer
experience. You won’t develop meaningful, nor profitable, relationships if you’re just another
“professional copy”.
Demonstrate your desire to earn business and the loyalty of your clientele both as a business client and
as a friend. Friends care about the deeply satisfying emotional rewards and other results that arise from
interacting with people who truly care about them and their interests.
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