After a business dinner recently a vendor I’m working with said security guard service is a commodity – the only difference is price. To be honest, that torqued me a little.
I’ve heard the “commodity” label so many times over the past years I’d stopped listening. The vendor’s comment reminded me why I DON’T think our services are commodities. Not guard services, not janitorial services, and not any facility service business.
Here’s how Merriam-Webster defines commodity: a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (as brand name) other than price.
Yes – facility contract services ARE widely available AND have smaller profit margins.
Yes – price is a distinguishing factor. But it isn’t the only one. Otherwise, if only price mattered, low price would win each time, every time – and it doesn’t.
So, while facility services have some things in common with commodities, it’s Webster’s “diminishes the importance of factors” that reminds me our services are not commodities.
Why? Because of variability.
Think about it. A commodity can’t be distinguished from one another, from one provider to the next, right?
Yet everyone, even the person on the street, recognizes the fact that a service varies. Has to. Services are performed by people – the most variable things on the planet. Can’t do it the same way each time, each day, at each location.
And if the people who provide services vary, think about the variances in how supervisors supervise, managers manage, and owners own companies. It’s a world of difference.
I think the “commodity” label gets attached to us for 2 reasons:
We’ve Done a Poor Job Distinguishing Ourselves
As facility contractors we’ve done a poor job distinguishing ourselves from each other. Customers have a hard time choosing when we’re all saying the same thing. We’ve made ourselves look like each other.
- Who doesn’t have a Quality Control/Assurance program?
- Who doesn’t train their employees?
- Who doesn’t use technology in some manner?
We can’t blame customers who believe they’re buying commodities instead of facility services. We’ve taught them. The good news is we can do a better job distinguishing ourselves to customers. Hey, that’s my career.
Expecting Higher Margins
When someone says a facility service is a commodity, they’re talking about margins. They don’t think our margins are normal, that they’re too low. And they’re right. Our margins can be thought of as low…when compared to software companies. But compared to supermarket companies (1-2% net) – our margins can look pretty good.
Is Your Service a Commodity?
What are your thoughts? Is your business a commodity, or not? What are you doing to distinguish yourself as not being a commodity? Post your comments here.