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Market Commoditization of Products and Services
Abstract
Commoditization means a situation where a company's products and services are very similar to competitor products and services in features, prices, etc. Trend toward commoditization is still accelerating due to globalization, increased information exchange, technological developments and so on. Information transparency among competitors makes it difficult to maintain uniqueness. So, comes the price wars in order not to lose market share and hence top line figures. Commoditization needs an adjustment in present strategy. Differentiation is a very common approach for presenting higher value-add to customers, which should be an ever lasting process. Branding of products and services is a strong differentiator. Brand loyalty means any product/service is uniquely better and different, not cheaper. Following low cost strategies is a partial escape from commoditization. All those above issues have been closely examined in the context of theoretical framework. Surviving in a Commoditized World When the products/services provided by a firm can be supplied equally well by a number of other firms, then that product / service simply becomes a commodity (undifferented product/service) and price is often the only factor in supplier selection. Once a firm becomes simply a commodity with no value-add, the company
... Desde la perspectiva comercial es necesario identificar elementos que diferencian al producto y que le permiten posicionarse en el mercado. En estalínea, se advierte que la percepción de la calidad en los productos en ocasiones esta relacionada con la marca del producto o a su lugar de origen, en el primer caso, la marca utilizada por empresas de productos básicos, donde los bienes o servicios son muy poco diferenciados, se considera una alternativa para competir más allá del precio y volumen, esto facilita al producto con marca a permanecer en el mercado donde existe una tendencia constante hacia precios bajos (Dumlupinar, 2006). Sobre el lugar de origen, recientemente ha aumentado el interés por el origen en los alimentos, como resultado se incentiva la producción y consumo de productos locales; derivado del temor percibido por el consumidor en la industrialización y desconocimiento de lugar de procedencia de los alimentos, induciendo al consumidor a reducir este riesgo al vincularse options in the mountainous area of Sonora. ...
... From a commercial perspective, it is necessary to identify elements that differentiate the product and that allow it to position itself in the market. In this line, it is noted that the perception of quality in products is sometimes related to the brand of the product or its place of origin, in the first case, the brand used by companies of basic products, where the goods or services are truly little differentiated, it is considered an alternative to compete beyond price and volume, this facilitates the branded product to remain in the market where there is a constant trend towards low prices (Dumlupinar, 2006). ...
... In general, the research findings show that the brand influences the consumer's purchase decision, results that are consistent with previous studies that indicate the brand as a differentiating attribute (Lassoued and Hoobs, 2015;Dumlupinar, 2006;Hoeffler and Keller, 2002). On the other hand, the origin has been identified as an important factor to consider when making a purchase decision, and particularly in the garlic from Arizpe. ...
Garlic is one of the best known and most widely consumed vegetables in the international field. Regarding its production, Asian countries are identified as the main producers at a global level. Mexico have a significant production of garlic, occupying the fourth place for its productive volume in Latin America and in some regions such as the municipality of Arizpe, Sonora has a productive vocation, contributing to the region's economy and family support. Hence, for a significant number of small producers, it is essential to remain competitive in the garlic market. As a positioning strategy, the creation of a regional brand emerges as a feasible alternative. That is why, and in order to know the preferences that consumers manifest towards Arizpe garlic, an experiment of choice was carried out, a methodology widely used in agri-food marketing studies, the NGene software was used for the analysis of data and in the Limdep software, a conditional logit model was estimated. The results show that the manufacturer's brand and regional origin exert a positive influence on consumers. It is noted that consumers would be willing to pay a premium if the products have the regional or national brand attribute. This information suggests the possibility that exists for small producers in the study region to position themselves in the market with a regional garlic brand.
... Aaker (1991) defined brand as a name and/or symbol intended to identify the product and differentiate it from competitors. Commoditization is the high match between competitors' products in the same category in regard to features, prices, shape, color and trust, etc. (Dumlupinar, 2006). On the other hand, differentiation is the level of the added-value of each product. ...
The current study addresses an important question: is bottled water a commodity? How consumers in Saudi Arabia categorize bottled water? This study provides insights for marketers to understand the transition between commodity and brand. It also adds to the current literature on price fairness and brand trust by highlighting the impact of product design and e-WOM. Also, brand trust may not act as trigger to purchase intention, but it helps consumers to have higher value of the product. A total of 1079 completed and usable responses were from the total participants. The relationships between the constructs were tested using Structural Equation Modeling (SEM) with Maximum Likelihood (ML) estimate. Next, the theoretical and managerial implications to the results of the study are discussed. This study broadens our understanding of the product transformation from commodity to brand. Moreover, the result helps managers to differentiate the products and enhance brand trust for consumers to positively perceive the product price. The current study adds to the literature by addressing the consumers’ understanding of branding and commodity. Additionally, empirical evidence through this study contributes to the practitioners in the Saudi food market.
... Branding is a way to escape from being commodity on the price and volume. Branding also helps to keep the brand surviving in an environment where there is a constant drop in prices (Dumlupınar, 2006). In today's competitive business environment, marketers have to work harder than ever to get some degree of differentiation to prevent their products from being seen as commodities (McQuiston, 2005). ...
Sunflower oil is the most preferred liquid vegetable oil by consumers in Turkey. The purpose of this study is to reveal the order of important attributes, affecting sunflower oil preference, namely brand, production method, country of origin and price. Different levels were defined for the attributes such as manufacturer and cooperative levels for brand, organic and conventional levels for production method, domestic and foreign levels for country of origin and ₺21, ₺26, ₺32 levels for price attribute. The data obtained from face to face interview with 211 consumers selected through convenience sampling method were evaluated by conjoint analysis. The preference order of these four attributes and their levels are listed as follows: domestic origin, price of ₺21 for 5 litre, organic production and manufacturer brand. Although the topic is very important, sunflower oil in term of marketing concept has not been studied sufficiently. This study is expected to present a point of view to differentiate products to the players in the sector living in an intense competition.
... Differentiation is a very common approach for presenting higher value-added to customers and branding of products and services is a strong differentiator. Branding is a way to escape the commodity trap of competing on price and volume, which also helps the branded product survive in an environment where there is constant downward pressure on price (Dumlupinar, 2006). In today's competitive business environment, marketers must work harder than ever before to achieve some degree of differentiation for their products to avoid being viewed as a commodity (McQuiston, 2005). ...
Purpose
– The study was conducted with the aim of understanding brand awareness among consumers and analyzing the attitude of consumers towards selected branded commodity food products. An attempt was also made to examine the factors influencing the purchase of selected branded commodity food products.
Design/methodology/approach
– The products selected for the study were branded rice and branded sugar. A sample of 200 respondents was selected from different localities of a city in India.
Findings
– Major sources of awareness, for branded rice and branded sugar, are friends/relatives/reference groups, point-of-purchase display, and retailer's recommendations. Respondents perceive free from adulterants, free from insecticides/pesticides/harmful chemicals and social status as the most important parameters of branded rice and branded sugar. The most important factors influencing the purchase of branded rice and branded sugar were found to be flavor, aroma, free from insecticides or pesticides and free from adulterants.
Research limitations/implications
– Further studies can be conducted with a larger sample size. Importance of brand equity with respect to commodity products can be analyzed.
Practical implications
– Marketers could frame strategies for different market segments based on demographics. Brand awareness needs to be given adequate focus by the marketers.
Originality/value
– This paper has made an attempt to study purchase behaviour with respect to commodity products. Not many studies have been undertaken to analyze brand awareness, and consumers' attitudes towards branded commodity food products in developing countries like India.
Commoditization refers to the process by which a product or service becomes standardized and interchangeable with similar products or services on the market, resulting in a reduction of its perceived value and a focus on price competition. The extant literature lacks a validated scale to assess product commoditization from a consumer perspective. The current research conceptualizes the construct of product commoditization and develops a self-assessment scale that evaluates commoditization as expressed by the four dimensions of brand importance, ease of switching, price sensitivity, and product homogeneity. Four studies using multiple methods confirm the reliability and validity of the product-commoditization construct.
The chapter examines direct and indirect firm-related drivers of industry commoditization, a rising phenomenon characterized by homogenous products, price-sensitive customers, and low switching costs in stable industries, which originated in diminished differentiation among firms in that industry (Reimann et al., Toward an understanding of industry commoditization: Its nature and role in evolving marketing competition. International Journal of Research in Marketing, 27(2), 188–197, 2010). The chapter complements previous marketing perspectives on commoditization by adding an organizational perspective. Firms operating in the same industry face similar environmental pressures that define the framework for legitimate social norms in the respective industry (DiMaggio & Powell, The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160, 1983). To achieve social legitimacy, firms comply with these pressures by adapting their structures, processes, and behaviors in a similar manner (Meyer & Rowan, Institutionalized organizations: Formal structure as myth and ceremony. The American Journal of Sociology, 83(2), 340–363, 1977). The author questions if converging firm structures, processes, and behaviors diminish differentiation among firms and result in industry commoditization. A quantitative empirical study conducted with 209 top managers and marketing executives from various industries sheds light on this question and further examines organizational impacts on institutional isomorphism, which represent indirect drivers of industry commoditization.
This article illuminates the question how brands can help prevent the commoditization of offerings. The concept of interest is brand relevance, which refers to the importance of the brand as purchase decision criterion for customers in purchase situations. Based on a brief review of prior work on the relevance of brands for commodity products, this article discusses the merits of configuration theory as an inquiry system to further the understanding of what makes brands relevant. The article gives brief overview of the configurational approach and outlines avenues for future studies using this approach.
The successful commercialization of commodities and the prevention of possible commoditization of offerings are key tasks of companies in many industries. This article aims to further the understanding of commodity marketing by further illuminating key concepts and processes. In addition, this article discusses different drivers of commoditization, distinguishing between company-related, offering-related, buyer-related and market-related factors. Furthermore, it outlines strategies to prevent or reverse the commoditization of offerings. The article illuminates two types of de-commoditization efforts: price-based and non-price-based approaches. It concludes with a discussion of avenues for further research and implications for management practice.
Die Differenzierung von Angeboten im Wettbewerb sowie die Profilierung der eigenen Leistungen gegenüber Kunden ist eine der
grundlegenden Aufgaben des Marketing. In diesem Zusammenhang stellt insbesondere eine Leistungskategorie Unternehmen vor besondere
Herausforderungen: so genannte „Commodities“. Unter Commodities werden gemeinhin undifferenzierte und weitgehend als homogen
wahrgenommene Leistungen verstanden. Typische Beispiele für Commodities finden sich sowohl im Konsumgüterbereich (z. B. Papiertaschentücher,
Tomaten, Bananen) als auch im Industriegüterbereich (z. B. Chemikalien, Schüttgut). Neben den aufgezeigten Produkten sind
Commodities aber ebenso im Dienstleistungsbereich anzutreffen. Typische Beispiele für Commodity Services sind Transportdienstleistungen,
Autovermietungen oder Telefonservices. Auf Grund ihrer spezifischen Charakteristika stellen gerade Commodities Management-
und Marketingverantwortliche in Unternehmen vor die Problematik, für Kunden relevante und für das Unternehmen umsetzbare Alleinstellungsmerkmale
zu definieren und sie durch den Einsatz von Marketinginstrumenten erfolgreich zu untersetzen.
Sowohl in praxisorientierten als auch in wissenschaftlichen Publikationen sind die Begriffe „Commodity“ und „Commoditisierung“
in zunehmendem Maße Gegenstand aktueller Diskussionen. Während unter Commodities in diesem Zusammenhang Leistungen verstanden
werden, die aus Sicht von Nachfragern als austauschbar angesehen werden, bezieht sich der Begriff Commoditisierung vielmehr
auf den Prozess, welcher dazu führt, dass Leistungen den „Status“ eines Commodities erlangen. Als typische Beispiele für Commodities
werden dabei oftmals Konsumgüter, wie z. B. Papiertaschentücher oder Zucker, aber auch Industriegüter, wie z. B. Schüttgut,
Stahl oder Chemikalien, angeführt.
Die Differenzierung des eigenen Leistungsangebots von Wettbewerberangeboten stellt für Anbieter von Commodities eine zentrale
Herausforderung dar. Unter Commodities verstehen wir Leistungen, d. h. Produkte und Dienstleistungen, die trotz mehr oder
weniger vorhandener, objektiv differenzierender Leistungsmerkmale von der überwiegenden Mehrheit der Nachfrager als austauschbar
wahrgenommen werden. Als typische Beispiele für Commodities werden zum einen Produkte, wie z. B. Papier, Weizen, Schrauben
oder Chemikalien, und zum anderen Dienstleistungen, wie z. B. Transportdienstleistungen, Telefonservices oder Autovermietungen,
in der Literatur erwähnt.
Price wars are a fact of life, whether we're talking about the fast-paced world of knowledge products, the marketing of Internet appliances, or the staid, traditional sales of aluminum castings. If you're a manager and you're not in battle currently, you probably will be soon, so it's never too early to prepare. The authors describe the causes and characteristics of price wars and explain how companies can fight them, flee them-or even start them. The authors say the best defense in a pricing battle isn't to simply match price cut for price cut; they emphasize other options for protecting market share. For instance, companies can compete on quality instead of price; they can alert customers to the risks and negative consequences of choosing a low-priced option. Companies can reveal their strategic intentions and capabilities; just the threat of a major price action might hold rivals' pricing moves in check. And, finally, companies can seek support from interested third parties-governments, customers, and vendors, for instance-to help avert a price war. If a company chooses to compete on price, the authors suggest using complex pricing actions, cutting prices in certain channels, or introducing new products or flanking brands-each of which lets companies selectively target only those segments of the market that are under competitive threat. A simple tit-for-tat price move should be the last resort-and managers should act swiftly and decisively so competitors will know that any revenue gains will be short-lived.
Sumario: Business strategy: the concept and trends in its management -- Strategic market management -- Customer analysis -- Competitor analysis -- Market analysis -- Environmental analysis -- Self-analysis -- Portfolio analysis -- obtaining a sustainable competitive advantage -- Differentiation strategies -- Obtaining an SCA-low cost, focus, and the preemptive move --Growth strategies: penetration, product-market expansion, and vertical integration -- Diversification -- Strategies in declining and mature markets -- Implementing de strategy -- Formal planning systems
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