Reaction paper to the article "Even commodities have customers" by François M. Jacques

It is often acknowledged that big corporations don’t innovate or at least that they have the most difficulties innovating. It seems harder to shake a group of people who are set in their ways. Big firms usually have a long tradition of doing things a certain way and that routine does work for some during a moment. “So if it’s not broken, why fix it”?

We can see just how true that can be through the personal case provided by François M Jacques. Indeed, the head of marketing at Lafarge's cement division relates the hardship of implementing a new marketing vision to this group stuck in a commodity market with no significant difference between products from different manufacturers. The only way of differentiation would have been lowering price and thus lowering the margins.

However, applying marketing technics and segmenting customers allows the author to sell product at higher price compared to a commodity. He publish a set of few rules from its own experience he considered important to develop marketing in a company:

1)   Inform executives and eliminate their resistance to be sure they agree to use marketing techniques

2)   Remind them the key points of marketing and perform a segmentation analysis using the same metrics and milestone for all the division

3)   Prove the efficiency of the market analysis as early as possible

4)   Provide clear measurement of the improvement

5)   Promote idea and experience sharing between employee

6)   Create a common marketing division

7)   Be an independent part of the management

After implementing his recommendations, Lafarge's profit significantly increased.

Another striking example of marketing effectiveness in a commodity market was Apple in 2006. This year, Apple stopped using PowerPC processors and started using Intel x86 processors, du to their higher performance per watt. As a consequence, the company was using the same hardware as other personal computer manufacturer.

Instead of lowering their prices in hope to increase their market share and frontally attack other companies, they segmented the market and choose to focus on the most profitable group. By relying on design, reliability and ergonomic, their computer became associated with well-off customer and creative professions. Apple was able to keep high margin.

Today, a lot of historical Apple's competitors have disappeared or been sold (IBM PC division has been sold to Lenovo, Acer bought Packard bell, etc.), due to the commodity market and the competition against tablet and smartphones.

To conclude, it must be noted that marketing techniques are a powerful tool to increase profit even in a commodities market.