Clarke-Hill, Robinson and Clarkson (1999, pp. 1-2 of 20) define
commodity products as:
“Commodity products are
those products perceived by both buyers and suppliers in a market as being
homogeneous and undifferentiated. A commodity product can be defined as
follows: Manufactured to a standard or fixed specification, bought in response
to basic and essential needs and used in markets where purchasing decisions are
governed by rational factors. Typical commodity products include plywood,
plastic, tubing, strip steel and salt [I add “glass”
too as - in most cases - a commodity product]. In commodity markets, the
products of one firm are perceived by the market as generically and
functionally identical with those of the other suppliers. This does not
preclude firms to differentiate their offering as a means of escaping the so
called “commodity trap”.” and they continue “In an era of strong competition, over
capacity in many sectors and extreme price sensitivity, chemical companies are
attempting to break out of the commodity trap. Companies that are operating in
mature markets with commodity type products and with large investments in
production capacity and the need to produce at or near optimum efficiency have
begun to consider alternative marketing strategies for their products and have
started to get nearer to their customers”.
Levitt (1980) stated that “There
is no such thing as a commodity. All goods and services are differentiable”
and Pine, Peppers and Rogers (1995) agree noting “Even commodity products are a bundle of ancillary services, delivery
times, invoicing, schedules, personalised reminders and updates and other
features that are rarely commodities”.
Unger (1983) defines various
products categories with supplier companies with commodity products been
characterised as production oriented, with relatively high capital investments
and low administrative, selling and marketing costs.
Wei, Russel and
Swartzlander (1979) define commodity products as those that are sold mainly on
price, reliability of delivery, convenience, little need for technical service
or marketing, while Trout and Rivkin (2000) call organizations to
“Differentiate or Die”.
Combining the definitions of Clarke-Hill, Robinson and Clarkson (1999) and Unger (1983), we may define commodity products, as those products that are perceived by the market, as homogeneous, generically and functionally identical with those of other suppliers, manufactured – usually by companies with heavy capital investments and production orientated – to a standard or fixed specification, covering basic needs, requiring little administrative, marketing or selling costs and facing high price sensitivity.
ReplyDeleteThe goal of the marketeer in order to avoid this high price sensitivity (“commodity trap” with continuous and disastrous price reductions in order to achieve the required selling volumes for the manufacturers to work with optimum yield) is to change the customers’ perceived value for these products as commodities, differentiating them from those products of other suppliers (relationship marketing, service, personnel etc.).