Wade Armstrong

• Latest
• Archives
• Links
• About Me
• Projects
• Contact Me

James Bond: a Commodity?

Posted Saturday December 16, 2006 in Business

I — rather belatedly — saw the new James Bond movie this weekend. After years of Bonds who were indistinct from any other action hero, Casino Royale finally gives us a satisfying, absorbing Bond. The theater at which I saw this movie even offered me a nice bit of gratitude: “Thank you for choosing Pacific Theaters,” the promo reel said as it ran before the movie. Unfortunately for the producers of this clip, I didn’t choose Pacific Theaters. Like most people, I chose the convenient place and time for the movie, not the specific theater chain. Theater chains are a commodity: all are essentially equivalent to the consumer. Commoditization is a serious threat to almost every product, but these same theater chains show us some ways all of us entrepreneurs can avoid becoming commodities too.

What Makes a Product a Commodity?

Technically, any product that is entirely interchangeable with any other product of the same type is a commodity. From the marketer’s point of view, this means that if your customer can replace your product with your competitor’s product, without giving anything up that matters to them, then you’re a commodity.

It’s the “matters to them” part that’s really the key here — your product may have features that don’t matter to the customer. If your extra features don’t matter, you’re a commodity. Companies that think they’re not commodities but really are to most of their customers include:

• Major US air carriers
• Record labels

How Do You Keep Your Products From Being Commodities?

Avoid being a commodity by delivering the benefits that your customer values the most. It’s just that simple. Sometimes, the standard benefit segmentations within an industry do not match customers’ needs, perhaps because emerging trends are changing customer needs. Spend time with your customers and learn about their needs. Be prepared to show market leadership and do things differently than your competitors. Offer unique features that provide meaningful benefits to your customers.

Some companies have broken out of the commodity marketplace:

• Airlines think they compete on routes, but this is rarely true: typically there are multiple flights between cities, and a consumer can choose one or another with very little switching cost. Customers choose JetBlue because of its in-seat DirecTV and inexpensive prices, both benefits which customers value highly. Some customers also value JetBlue’s use of less-congested, and sometimes more-convenient, secondary airports.
• Record labels are commodities to customers because, with few exceptions, the label doesn’t tell you anything about the artist or the music quality. Quick: who even knows what label Beyoncé is on? It’s Sony. Would a Beyoncé fan buy a PuffyAmiYumi CD just because they’re both on Sony? Blues fans can comfortably buy almost any album put out by Alligator Records, because this label has a history of publishing the music of the best blues artists. Even an unknown on Alligator is likely to be pretty good.

Bond and Commoditization

The Bond franchise became commoditized itself for a while, with ill-suited actors and poor scripts that turned it into just another action movie. During this time, box-office receipts fell and the cachet of the brand decreased, while competing action hero franchises popped up. Movies like XXX promised to be “the new Bond” and delivered, with great action and better gadgets. But, with Casino Royale, the filmmakers have rediscovered the benefits that consumers get from a good Bond movie — yes, action and thrills, but also snappy dialogue, stereotyped and yet inviting characters, ritzy locations, gadgets, girls, and a hero you can root for — and made a movie that has performed well and gained glowing reviews.

Movie Theaters Break Out of the Commodity Market

Movie theaters can become something other than commodities, often quite successfully. The winners break away from the who-has-the-most-locations, who-has-the-most-movies-on-the-most-screens game:

• The Cinerama Dome movie theater in Hollywood offers reserved seating, big seats, and a gigantic, gorgeous screen, showing top-quality movies; movie aficionados who live in LA choose to go to this theater specifically. Rather than competing with more screens and showtimes, the Cinerama Dome is as big a destination as the movie itself.
• The Bridge movie theater, also in Los Angeles, has big screens, big seats, and cafes with delicious food and even alcohol. It’s a local date destination, not just some convenient place to see a movie.
• Back in my hometown of Baltimore, the Senator movie theater has long been the place to see the biggest movies on opening nights. Back when all movie theaters had small screens and seats, the Senator had a beautiful 70mm screen and restored 1920s décor. The Senator was just as much a part of the moviegoing experience as the movie.

Commoditization and the Entrepreneur

Almost by definition, an entrepreneur can’t compete in a commodity marketplace. Where all products are interchangeable to the consumer, you must compete on price. Unfortunately, it’s rare that a new start-up will have a price advantage:

• Unless you have patent-protected technology, any established competitor will have the cash flow and access to capital required to update their physical plant to compete with any new production techniques you introduce.
• Established companies have already achieved economies of scale.
• People who have been working in a business for a while have learned the lessons that need to be learned to compete effectively - you may not have.

So entrepreneurs need to compete based on something other than price, and that’s fine. The trick is to find what benefits customers appreciate other than those already provided by your many competitors. JetBlue and Alligator did it; the Cinerama Dome, Bridge, and Senator theaters did it; Casino Royale did it; they all competed based on benefits that their competitors weren’t offering.

Making a product that is not a commodity is one of those things that’s both simple and exceptionally difficult. But, by offering a strong, unique set of benefits, benefits appreciated by a unique market segment, any company can stand out to its customers.