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- Commoditization converts products, including financial ones, into interchangeable and marketable items, eliminating differentiating characteristics.
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Mar 15, 2024 · Commoditization is a transformative process that turns products or services into standardized, marketable objects. This broad phenomenon has been particularly evident in the food industry, where the commoditization of the food chain has expanded market offerings but marginalized smaller producers.
- Overview
- What is commoditization?
- How to address commoditization
- Addressing commoditization examples
Markets often have similar products that compete with one another because they have similar features, prices or origins. Commoditization is a kind of competition where products are nearly indistinguishable from one another except for their price. Understanding what commoditization is, how it occurs and how to address it can help you make your produ...
Commoditization is a process by which certain products within a market become nearly identical to one another. Often, the only way to differentiate commoditized products is by their prices, as companies typically assign unique prices for their products. These products cluster under the same class or type of product and often create higher competiti...
1. Create a product niche
Narrowing your products into a more targeted niche within the market can help reduce commoditization and attract new buyers. Niches target specific groups, features or customer preferences. The more niche a product is, the more loyal its customer base can be, especially if there are few competitors within that niche. Consider creating a more specific niche to retain your product's unique status in the industry. For example, if you sell bookkeeping software, you could market it as bookkeeping software specifically for small retail businesses.
2. Introduce a creative pricing structure
Creative pricing can be an effective way to make your products more unique because prices typically distinguish commoditized products from each other. A creative pricing structure often makes it more challenging for a consumer to compare your prices directly with the competition, potentially increasing the chances that they choose your product. Consider bundling different products and services for a more complex pricing structure or offer multiple services as a package. For example, instead of simply offering classes, you might offer a complete course for a fixed amount.Related: How To Set a Pricing Strategy Framework
3. Customize your advertising to pain points
Marketing is a great tool that brands can use to combat commoditization because it helps shape the customer's view of the products and brand. Creating more appealing advertising that focuses on direct customer pain points may help customers feel more confident that your product is the best choice among its competitors. For example, you might try focusing on how your bookkeeping software solves common financial problems for small retail businesses. Marketing directly to customer pain points can inspire action and create satisfaction for the customer.Read more: Your Guide To Finding and Responding to Customer Pain Points
Graphics cards example
G.P. Vision Corporation and Vidal Networks both produce graphics cards (GPUs) for PCs. Their graphic cards have similar features, refresh rates and technology. G.P. Vision Corporation begins marketing its graphics cards for computer gaming, focusing on a particular niche of the graphics card market. Customers respond, purchasing more of G.P. Vision Corporation's graphic cards because they want a gaming GPU. The company attracts new customers and further differentiates itself from Vidal Networks through niche advertising.
Computers example
CircuitBoard PCs and Denver Computing both offer personal computers. CircuitBoard PCs produces computers with customizable parts, options for computer enhancement and pricing options for different models. Denver Computing offers a similar product but with proprietary software, limited customization options and limited pricing structures. CircuitBoard PC markets its products to students and individuals, while Denver Computing markets its products to creators and artists, focusing on a niche of computer users and proprietary software to combat commoditization.Related: 5 Types of Asset Classes
Food example
Denver Mountains Farms and Greenlife Agro-Collective both produce corn crops. Denver Mountains Farms uses pesticides and fertilizer in the production of its crops, which makes it similar to other local farms that produce corn in the same way. Greenlife Agro-Collective switches to zero pesticides and genetically modified organisms (GMOs). The company also obtains an organic certification from the government and markets its corn as organic and homegrown. Focusing on a high-quality product and a niche organic market helps differentiate Greenlife Agro-Collective from other corn providers.
Aug 12, 2023 · Commoditization is the process by which a product or service becomes a commodity, meaning it is indistinguishable from other products or services in its market. Commodity markets are ones in which the products or services being traded are very similar, if not identical.
Dec 11, 2023 · The progression of an item or service from being made available to consumers to finally being taken off of the market. Why is commodification important? Commodification is important because it...
Jun 19, 2022 · Commoditization is a process in which things which have distinctive traits become simply commodities and can be interchanged easily with other alternatives accessible in the market.
Apr 3, 2024 · Commoditization is the tendency for certain types of products and services to become a commodity over time. This means that customers begin to purchase the lowest price item every time as they view products in a category as more or less the same.
Oct 30, 2023 · Commoditization refers to the process by which a product or service loses its unique attributes and becomes indistinguishable from similar offerings in the market. In other words, when a product becomes a commodity, it is no longer viewed as unique or exclusive. Instead, it is seen as a standardized and easily replaceable item. Key Takeaways:
