Forums: Discussions for entrepreneurs and small business.

Taken from Wikipedia, "A commodity is anything for which there is demand, but which is supplied without qualitative differentiation across a market."

Examples would be things like rice, oil, scratch pads, combs, milk, and all other things that are basically "just things."

Marketing involves taking something out of the commodity level and moving it into the quality level----either for real, or through perception.

So we can say rice is rice, or we can say that Jimbo`s Brazilian Rice is loaded with vitamins (and by implication, no other rice  has any vitamins).

More and more, we`re living in a world where value, quality, personalization, and differentiation are being forced out of existence. One-stop shopping, templates, turnkey solutions, mass production, all are ways to reduce anything to a commodity.

Think about an artist painting pictures. Each picture is unique. Long ago, that was the only way to get a picture of your house, family, or scenery. Each picture had meaning, was special to the artist, and every one of them was different.

Then came lithographs, silk screening, printing, photography, Xerox machines and on and on. Each process opened a market by offering unusual and unique items to a large customer market. But at the same time, it introduced a "same-ness" to life.

Many things lend themselves to being commodities. When they`re first invented or discovered, they`re unusual and strange, almost unique for that matter. But with market acceptance, proliferation, and mass distribution, almost anything can be reduced to a commodity.

Computers used to be rare, hard to make, expensive, and only wealthy people could afford them. With the move towards mass production, and developments in new manufacturing processes computers have become commodities.

So the question is what`s the best category to choose when coming up with a business idea?

Do you want to sell what already has become a commodity, or do you want to create and sell something of value?

If you choose to sell commodities, then reality dictates that you must introduce a marketing process that will elevate your "generic thing" into the value category. Your "thing" must be or appear to be unusual, different, unique, special, or have some distinguishing value.

Another problem is that if you choose the unusual, new, different, artistic, personalized value item, then reality dictates that it will NOT fit into turnkey solutions. If everyone is selling salt, and you decide to sell windshield wipers, you won`t find a simple, template-based, turnkey solution to selling those wipers.

Windshield wipers don`t fit into a template designed to sell salt!

Much of today`s forced confusion is trying to put a round sphere into a triangular hole. Marketing companies seem to be trying to make themselves into commodities. They routinely try to convince you that no matter WHAT you come up with, it`s been done to death.

These marketing companies often will try to tell you that a piece of rock is a piece of rock. So what if it`s a diamond? It`s still rock, so you can sell it at standard geology conventions. You can sell it by weight, or in bulk. Right?

Wrong.

Not everything is subject to being "just another thing." How do you decide? How will you know if your business idea is a commodity or a value item? How do you work out the value "proposition" if you do choose to sell commodities?

Craig;

I`ll bite, LOL :0)

I sell what is basically a commodity, in the recent past I could sell the extra value, That is my major if only advantage to the customer. These last few months things are approaching dire, maybe it is just the economy, maybe it`s just price, I haven`t figured it out yet. I have played with price and that does not seem to be the issue, therefore it must be the value or something else.

I honestly believe my "added" value makes my products well worth the price, as well the few customers I get these days are excited to get their products at such a great price. so it must be something else!

I am beginning to think your product must be small, inexpensive, for sure provide some value, easy to purchase, and super unique. thoughts like pet rock, hula hoop, Frisbee,  Licensed Master Curmudgeon, but something that china has not yet mass produced for 15 cents and distributed by wal-mart maybe an e book or something easy to scale and cheap to produce but bringing value to the customer.

I think at least for the present moment in time (read the next 12 to 18 months) you must provide a huge value, for a relatively small price, instant delivery, and easily marketed product.

I am actually thinking (read really) of putting together plans and instructions for my stuff, the work is done after the first piece, I can sell it cheap (volume makes the profit), I can download it instantly, the finished product is not my problem (decreased liability), the problem is I don`t know how to do that PDF technical stuff and can`t afford to pay someone (seems tedious and expensive).
want to partner, you do the writing, marketing, website, sales, and financials, I`ll tell you how to build the stuff, provide the material list, add some insider humor to the text, and cash my checks. what do you say 50/50?

Just a thought :0)

Stan, I believe you`re wrong. You hand-make your furniture. How is that a commodity?

Would you say you slap together some wood to make as much furniture as possible, paying no attention to any particular piece? :-)

Janie,
Jerky is jerky...it`s food, a commodity. The quality and value you add is your special recipe, your unusual mix, and your customer care.

Craig; let me explain my logic (it may be flawed).
I`ll use picnic tables as an example
on a generic level (the perception of the public) it is a commodity, there are literally thousands of people making and selling them. when you say or hear the phrase you immediately get a vision, almost anywhere you go outdoors (parks, rest stops, heck even McDonalds) there they are.

so if you can buy into that logic for a minute, how do you sell such a common thing? you add value, I add value with an "ample size", super heavy duty, hand crafted, often finished but at least ready to finish. all these things are added value to the customer, and most customers get it, they want it, now that they have seen it, touched it, tried it, it`s an easy sale.

The hurdle is how to get the customer from the generic picture burned in their brain, to make the trip, and investigate. If there are three people telling you "mine is awesome" the next thing you look at is price, you weigh "is the price in my budget", yes I want the value but can I afford it,
how much value do I want? so a "thinning" process has to happen before you get up and go lay hands on the sample. while I agree cheap begets cheap, price is a major consideration that drives action or not.

I suggest that anything that brings a generic picture to the masses brains, or flashes them back to some experience is a commodity, then value is added in some way or another to make it unique. so short of futures traders, most sales are of value added commodities.

I expect the inventors of the world with the follow through gene are fewer than we want to think, making an original product worth that much more in the market place, but still so few that most have to sell value added commodities.

Just my thought

I may be able to help clarify some things.  This is a confusing

Loren, that`s an excellent analysis of the difference between commodity selling and adding value, making a quality item and differentiating from the commodity (mass) market.

Stan, your explanation then makes an example of what Loren is saying.

I think that`s the purpose of this topic. We have way too many people passing through this community, wondering why their "stuff" isn`t selling. And they don`t understand that they`re trying to sell commodity items without any differentiation of value or anything else.

So Loren and Stan; you guys have a clear understanding of the difference between "blah" and the unusual. Now: Suppose we`ve got, say, an at-home mom who`d like to start a business.

There are affiliate programs, MLMs, import-export items, semi-creative items (e.g., Cafe Press, etc.), crafts, self-made products, inventions, technology, and creative ideas all over the place.

That budding entrepreneur is trying to build a business. What can they look for to see if they`re about to enter into a commodity environment or a value item? Borrowing from Stan, I`d begin with:

• Does this possible product fit a generic picture? When I think of this product, do I already have a general image of others like it that are "everywhere?"

Maybe we could build a sort of checklist for people. If it comes out that they`re about to invest in a commodity item, then we might propose a "rule." If you`re going to sell a commodity item, then what will you do to make it different from all the rest of the same product?

Craig;
First thank you for starting this thread, and Loren thank you as well for some insight. It has if nothing else caused me to think about things from another angle.

one thought that I had already been working on (maybe a bit misguided), but now can ask a few new questions (with this new enlightenment, I might even find an answer or two) if you are selling an item that can be defined at least as generic, or a commodity, you must somehow get some momentum rolling in order to expose your added value. Making the best pretzel is pointless unless the masses can enjoy it.
how do you get some momentum? I am starting to question myself  "where are all those generic things, where have I seen these"? where is this generic thing a requirement? is my added value attractive to these users?
Then the next step would be target those places, if you can get into just a few with your value added commodity, that is everywhere, end users will immediately unconsciously compare your brand to their generic image and hopefully upgrade the image. become the new standard image in the minds of the masses.
next assuming you can actually break into the "fixed" market the question comes, how will users know this is my value added commodity.if they want one? how do they know where to go? so permanent branding of the product must happen (not just the packaging), so that forever anyone that cares to can find one. I think of the Levis patch, you know what to expect from the jeans, and transpose that expectation to anything with that patch.

That`s it for now have to go to the shop,

Loren nails it, I think, and in particular with the concept of a technological leap. In marketing, branding, and positioning, the above is a great lesson for (hopefully) a whole lot of community members.

There`s some room to maneuver, though, in what "attribute" or class of attributes can we choose, in which to make a change.

For example, Kathy and I sell handmade signal flags. These are in the public domain, the patterns were set long ago, and those patterns won`t change. Neither can they be copyrighted. They`re signal flags.

Currently, the market assumes (important word!) that customers will buy an entire set of each alphabet character, each number, and certain repeater flags used within the standard set. Each flag comes in standard sizes, with Size-0 being the smallest at 10x15" or thereabouts. Also, each flag is rectangular, and usually has a 2-sided visibility.

Within the limited world of signal flags, they are generic.

We saw a possible niche that isn`t being met by anyone, certainly not at an affordable price----personalized messages. For instance, if a person were to order flags to spell "ANNE," they would require 2 "N" flags.

The Navy, if they spelled out the ANNE would use a "repeater" for the second "N". We produce 2 letter "N" flags, and charger per-flag standard pricing.

Additionally, we make 8x8 square flags designed to be hung inside on walls or windows, or in home-sized back yards. They`re smaller than "normal," and all existing factories would have to re-tool in order to produce "Our-size" flags. Commercial flags are too big for our market.

The two things that move our product out of the generic into the specialty or value arena are a) hand-made, and b) personal choice of only the desired flags and no extraneous flags.

We did produce a technological invention in our vertical hanging ladders, but that`s secondary to the overall signal flag business.

As such, we`re unique. Because we`re unique, it was relatively easy to become highly visible within the overall market, and in all the search engines.

What interests me is that rapid visibility. Yes it took a lot of work, but lots of people do a lot of work. Why did we become so visible? It`s because we moved "out" of the commodity market "in" to the value market with a unique selling proposition (USP).

In so many ways, marketing is like "spin." It`s the way you tell the story, not the plot itself that matters. One might say that the pilot who landed the plane on the Hudson recently is, "a guy who drives planes from one airport to another."

Someone else might say that, "He`s a brilliant pilot who brought together skill and good fortune, bringing off a miraculous landing under extreme conditions, thereby saving the lives of everyone on the plane."

Same story, different "spin."

Stan, you could say you sell wooden furniture that anyone could make if they felt like it, out of ordinary lumber and tools. It`s a bit bigger than other ordinary furniture.

But that`s focusing on the generic commodity item. On the other hand, you could say you sell handcrafted custom-designed outdoor furniture tailored to fit the customer`s environment, sense of beauty, and their budget.

Same story, different spin.

They point of this topic is to perhaps come at an important question from a different direction, thereby maybe helping folks understand marketing: "Why is there marketing, and can all products use the same marketing template? Is what`s good for one product, pretty much good for all products?"

No, it isn`t. Marketing isn`t a one-size-fits-all template process, where you slot products in and out of the same overall board game.

To understand when and why you would need marketing is step one. To then come up with a marketing strategy and campaign follows. Knowing whether you have a commodity or specialty item is a key starting point, in my opinion.