Jennifer B. Davis
Here is my theory: "Everything (every product or service sold) is a commodity."

How can I make such a bold statement? Isn't there a difference between bulk feed corn and a high-precision German sportscar?

Here is my rationale:

- Most goods and services are bought with cash (or the promise of cash, but that is a different post). Even those bought through barter arrangements often use the cash value as a medium for setting fair exchange rates.

- That cash could be used to buy any other good or service. Something marketers know as indirect or alternative competition. This is even more pronounced today than ever before because every local purchase is now competiting for resources with every purchase that can be made online.

- Cash is a commodity. It is ubiquitous. It has primary and secondary markets built around it. You can track its value (in terms of buying power) in a whole host of syndicated reports. The business of moving cash has hundreds of competitors.

- Because you buy with cash and cash is a commodity, then every good that you purchase ultimately competes against any other good and thus is a commodity.

So, the role of corporate strategy (and of course marketing and advertising, as Hugh Macleod's cartoon posted here so aptly describes) is to fight the gravity of commodification with its opposite...differentiation.

But rather than starting from a baseline of differentiation (and fighting the slippery slope downmarket), why not embrace the slippery slope? And challenge your organization to think about what makes a commodity successful? A simple selling proposition. Clean channels of distribution. A high-quality product that doesn't require a lot of post-sales support. A lean organization focused on taking cost out of the system.

Then from there, the business can decide how it wants to differentiate. Generally, this is accomplishing by competiting on more than a single commodity category. IKEA doesn't only distribute Swedish fiberboard, but also markets high-style Scandanavian design. Ferrari sells the ability to get from point A to point B, and style, and the ability to beat someone off the line.

2 Responses
  1. rodschmidt Says:

    1. Have you studied the history of capitalism? "The market" has encompassed one area of life after another, with complaints the whole way. So your bold statement is the endpoint of that process.

    2. Commodities are fungible - once you have learned about one pork belly, you know about them all.

    3. It is said that couples have conflicts about money more than about anything else. Well -- if everything is connected to money, then a conflict about anything is also a conflict about money. Likewise, an emotional block or problem about anything is also, etc.


  2. As a wiseman wrote so many centuries ago, the "Love of money is the root of all evil." Thanks for your insightful comments, Rod.