I really like what Ed Byrne has to say about this:
This is how to de-commoditise your product! This is how to move your business UP the value chain and stop having to compete on price in an un-differentiated market!
If you want to avoid competing on price, and becoming a commodity, then you need to get customers that will buy your product for reasons other than price. How do you do that? Provide more than everyone else, be different and better. This doesn’t mean you line your products with gold – it just means the experience of dealing with your company is better than dealing with anyone else – and that in the long-term consumers know that buying from you, and sticking with your products, will ultimately be a better purchase and provide higher value than anyone else.
Read the rest of his post here.