Commoditization: What Is It? And What Can We Do About It?

By Andrew Paparozzi
In March 18, 2010

NAPL has long warned against the dangers of commoditization for the printing industry. But what exactly is commoditization and what can you do about it?

Commoditization of a product or service occurs when the only differentiating factor in the eyes of the consumer is price. In other words, commodities hold no customer loyalty, little pricing power, and usually no brand significance.

So what can we do to avoid commoditization? We need to look beyond just printing on a job-by-job basis and focus more on providing results that are quantifiable in terms of the client’s success. As one participant in our State of the Industry research puts it:

“We must find ways to add value. We have to find way to connect
with clients concerning what they are attempting to do and to provide products
or services to help them do it. That begins to move us away from being a
commodity. Where we can do that, we see margin differences. Where we can’t, we
see margin erosion. And we see it everywhere—not just in one segment or
industry—but across the board.”

 

The chart below is taken from the NAPL State of the Industry Strategic Perspective 2010, to be published later this month. It shows a value-proposition spectrum that NAPL first introduced almost five years ago. In introducing the spectrum we argued that sustainable success in our industry would require selecting a position on the spectrum based on thorough analysis of what’s really necessary to succeed there. Though introduced almost half a decade ago, its relevance is as great—if not greater—now as it was then.

As we progress from left to right on the spectrum, we see a transition from a traditional printing company that produces print (commodity producer) to that
of a communications/marketing company that utilizes print as part of a meaningful solution to its customers’ needs (solutions provider). We also see the requirements for success begin to shift from internally focused (traditional print capabilities) to externally focused (contributing to the client’s success). So, in order to escape commoditization, we need to change from print-focused to customer-focused and drive the value of print rather than selling the product of print. And, as NAPL has also long emphasized, simply adding services—even hot services such as variable-content digital, database management, and Web-to-print—is not the answer.

Where do you stand on the value-proposition spectrum?

Commodity-Value Prop

 


Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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