Is Your Product Stuck in a Pricing Race to the Bottom?

If you're stuck trying to compete in a commodity market, your sales can quickly decline in a pricing race to the bottom. But there's a better way to compete in a commodity market. Licensing a well-known brand sets your commodity product apart from the competition and enables you to stop competing on price.

That's what one electronics manufacturer has been doing for the last 45 years. They licensed the Phillips Electronics brand name for their consumer electronics, accessories, and mobile products, giving them great brand recognition on retail shelves.

And you can do the same thing if you're stuck in a “commoditized” market. Rather than slugging it out and beating each other up over declining prices and profit margins, you can find a well-known brand to set yourself apart in the market.

That's one of the most significant benefits of brand licensing. You tap into the brand “equity” and connection with the consumer rather than spending all your money trying to keep your head above water. This licensing strategy lets you focus your resources on selling and improving your products. Plus, you also get to ride the coattails of your brand partner, capitalizing on their advertising and promotions, which further enhances your product sales.

One example is the well-known Fabreeze deodorizer. The brand owner licensed its brand to a cat litter company. It made sense. The value of that brand to the cat litter company is its recognition sets it apart from the competition and helps reinforce to the consumer their product will keep their cat litter and house smelling fresh.

Food and beverage is another commodity market where brand licensing is a popular strategy. Some examples include the beer brand Guinness, whose licensing extends its brand into food seasonings, and Jack Daniels, a well-known whiskey licensing its brand into the barbecue sauce category. This type of beverage-to-food brand extension makes sense because food and alcohol are often consumed together.

One of the ultimate examples of differentiating a commodity product is water. Think about all the brands of water that now exist for what is just water.

A little creative thinking is one of the best ways of figuring out what brands make sense for your product. For example, does your product have wheels? If so, what types of brands make sense for a wheeled product. Wheels mean transportation. A great example here is baby strollers. Tough to stand out in this crowded market. But one smart baby stroller company licensed the BMW brand. Not only do they stand out from the competition, but the brand also gives them a great “dad” appeal, which expands their customer base (and probably gets a higher price).

Trying to establish a new product is risky and costly, especially if your product competes in a commodity market. That's where licensing can be an effective strategy for your business. Rather than struggling to stay profitable, you can license a well-known brand to help set your product apart. Plus, the right brand license increases your product appeal (and, in some cases, price) and gives you access to the brand owner's markets, resources, and customers.