“There is no such thing as
commodity”, said Ted Levitt in one of his 1980 articles in HBR (Marketing Success Through Differentiation – of Anything). “All
goods are differentiable.” Modern markets operate by differentiation. Even such
generic products like steel, coffee etc. are sold by differentiation today.
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Selling and Marketing: Differentiation, Tangible and Intangible Products
|
Tangible products:
Tangible
products are evident – we can see them, feel them, smell them and even taste
them. The quality or the satisfaction the products provides is judged from what
we see, feel, smell etc. But how is the tea sold by Uniliver different from
Tetley? Apparently one may not be able to make any difference. This is where
the intangibles make a difference even in tangible products.
Companies selling consumer and
industrial goods seek competitive distinction by incorporating product
features. Some of these features are visible and measurable (tangible) and some
are implied (intangible).
Commodities which are
undifferentiated are presumed to be price sensitive. If walking down the road a
few yards can get a fractionally better price, the customer would rather walk.
This is the concept of perfect competition found only in rarefied text books on
Economics. In reality, even walking that few yards has a cost, and the customer
evaluates it. That is, however, another matter. To come back to our point,
companies do create features in tangible goods, that is, differentiation by
adding other considerations. Therefore,
going beyond Economics text books, in the real world there will always be other
considerations (tangible and intangible differentiation) in making a buying
decision.
Intangible products:
Ted Levitt
succinctly puts it: “The most important thing to know about intangible products
is that the customers usually don’t know what they are getting until they don’t
get it. Only then do they become aware of what they bargained for; only on
dissatisfaction do they dwell”. Satisfaction’s existence is affirmed only by
its absence.
That is a curious situation where
the customer will be aware only through negative input of failure and
dissatisfaction, not of satisfaction. This makes the company’s marketing
vulnerable to competition unless it makes effective differentiation.
Infusing tangibility to intangible and intangibility to tangible products:
All products have elements of tangibility
and intangibility. To differentiate intangibles, companies have to create
surrogate or metaphors for tangibility – how people
dress in the Bank’s office, how the marketing person articulates, writes or
present etc. To remind customers of what they are getting there is need to
continuously convey the message.
This will ensure that rare occasions of dissatisfactions don’t get overblown.
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Selling and Marketing: Differentiation, Tangible and Intangible Products |
Just as tangible products have to
be intagibilised to differentiate, intangible products need to be tangibilised
for “managing the evidence” – that is, give an impression that the product,
indeed, is different. This should be systematically
done. Some of the examples Levitt gives are interesting: hotels wrap their
drinking glasses in fresh bags or neatly shape the end-pieces of the
toilet tissues into a fresh looking arrowhead, or put on the toilet seat a
“sanitized” paper band. All these actions say with silent affirmation clearly
that the room has been specially readied for you – no words spoken. Those
tangible messages of intangible service would be much more convincing than many
spoken words; and in any case, how are you sure your staff will tell the
customer every time?
Keeping customers for an intangible
product requires constant reselling efforts while things go well lest customers
get lost when things go badly. Relations with customers are managed much more
carefully by tangibilising.
Similarly tangible products are
differentiated by intangibles. To quote Levitt again, “An automobile is not
simply a machine for movement visibly or measurably differentiated by design,
size, color, options, horsepower, or miles per gallon. It is also a complex
symbol denoting status, taste, rank, achievement
, aspiration, …” Therefore, “A
product …is the total package of benefits the customer receives when he or she
buys it.”
It is the marketing process:
Products are always combinations of tangible and intangibles..
Differentiation is not of the
product per se, it is the process of marketing itself.
Differentiation is most readily
apparent in branded, packaged consumer goods; in the design, operating
character, or composition of industrial goods; or in the features or service
intensity of intangible products.
Notwithstanding all the skills in
differentiating anything, and the carefully created marketing process, the
experience since the time Levitt wrote this piece is that all differentiated
products have the tendency to become commodities. This whole process of
differentiated products becoming commodities can be likened to a pyramid – a
small tip of the pyramid belongs to the reign of highly differentiated
products. As you go down ‘managing
the evidence’ is less clear, irrespective of tangibility or intangibility. At
the bottom the large mass of price sensitive undifferentiated products reign
(though the companies marketing them claim their different qualities). This is
not to deny that differentiation
depends on how powerfully one operates the business. In the way the marketing
process is managed successfully, to rise to higher levels in the pyramid, may
still reside the opportunity for many companies, especially those that offer
generally undifferentiated products and services, to escape the commodity trap.
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