Commoditization or, the evaluation of a product against its competitor mainly on the basis of price is something that any marketer dreads. Though commoditization is not something new, it is growing at a rapid pace, which is becoming too hot for many marketers to handle. This article looks at the causes behind this and the different strategies that marketers are employing to counter it.

The appearance of advertisements and signs like "Grand festival discount", "Special, once in a lifetime offer" and the more honest "Special clearance sale" could be confessions by companies about their inability to escape commoditization of their products.

At this point, one may wonder what commoditization is. As a general term, commoditization is the process by which a product that was not a commodity is transformed into one.¹ It is also known as commodification. However, it has different terms of reference for economics and business. In economics, commoditization is seen as the transition from a state of monopolistic competition to that of perfect competition. In business, it is the name for a process whereby a branded product with differentiating features is degraded into one that competes purely on price alone.Going back to the first definition, we see the word "commodity" juxtaposed with "product". The definition implies that though the two are essentially different, the process of commoditization renders them similarity.

Commodities do not possess any distinctive features and therefore are fungible, which means that their nature is unchanged. As such, their prices are governed by the laws of supply and demand. Manufacturers have more leeway in fixing prices because they must incorporate the cost of manufacturing into the price. The rationale behind this is governed by the concept of value exchange. By subjecting commodities to a manufacturing process, companies are altering their nature so that customers derive incremental value. Thus, goods have their own identity based on their differentiation. To be successful, this differentiation has to be meaningful to customers and must sustain this meaning over a period of time. This is where they create their own identity in the minds of consumers and develop into a unique brand.