The Risk of Market Commoditization

For companies that operate in a commodity market, competing on price alone is usually a stressful and futile business strategy. When the only protection a company has against competition is lower price, an aggressive new entrant offering an even lower price for the same product or service can disrupt the business overnight, luring customers away from an established business that had nurtured customer loyalty for decades. Indeed, low-cost products and services often mean subpar quality and poor customer service, and by the time the newly-recruited customer realizes it, the damage has already been done and is difficult to reverse. As the old adage goes, it costs much more to regain a lost customer than to keep an existing one.

McKinley Elevator Corporation is a family-owned business that specializes in elevators, accessibility lifts and car lifts for homes, public facilities, and businesses. Even with reputation for top-notch customer service, the company is constantly at risk of losing market share to lower-cost competitors, and under pressure from elevator manufacturers seeking to drive down cost in a highly commoditized and price-competitive market. Read More