The gravitational pull of commoditization should be on the mind of every brand marketer, even those who manage the most innovative and disruptive brands in the world today. Often thought of as a concern for only the most ubiquitous products and services, the effect of commoditization doesn’t discriminate, impacting the dynamics of every market, industry and category. With the common flight path from wunderkind disruptor to everyday mainstay, brand managers should plan for their own obsolescence, navigating the near-inevitable course toward commodity status.
While there are many contributing factors, the underlying cause of commoditization is rooted in the economic principle of supply and demand. As a product or service becomes more plentiful, it becomes more of a commodity, characterized by being easy to produce, market, deliver and gain access to while also being difficult to differentiate, distinguish and price as premium. As barriers to supply fall, so do barriers of entry. Commodities become plentiful, and if left undifferentiated, they become perceived as interchangeable.
In some senses, brands supporting commodity products need to work harder because articulating product differentiation relies wholly on delivering a unique, holistic brand experience. Kleenex tissues might epitomize a commodity brand at its best, with Xerox copiers and Clorox bleach not far behind. Each brand is not only a category leader but has also become synonymous with an entire product category.
For brands, success—and even survival—means defining and managing the differentiation of their products and services to the greatest degree possible. From the strongest heritage brands to the emergent disruptors, marketers need to keep three things in mind.
Brands and whole categories have been awakened or reinvigorated as innovation, market or cultural trends shift direction. Today, the intangible yet incredibly valuable consumer benefits of privacy, anonymity and data security have become some of the most sought-after and differentiating aspects of respected brands today. With the proliferation of products and platforms—particularly connected objects and devices—comes heightened risks and the greater need for cybersecurity. It is here that we can see that tech giants like Apple are evolving toward an identity of service company as well.
Innovation is also driving change across other service-based industries, including law, stock trading, financial planning and advisory, mortgage and hospitality. In these categories, routine services that are commodity-like within their respective categories are being replaced by lower-cost providers, automation and AI. With the transformative rise of FinTech, innovative brands are challenging stalwart market leaders to provide new ways of doing business.
Successful brands within this category are finding fame in what were once mundane, pro forma tasks. Challengers, such as Mint and Acorns, are taking on established and entrenched incumbents who presided over aspects of financial management that consumers have previously thought routine and commodity-driven. Both brands recognize that they are delivering on a promise, upending traditional areas of business by redefining how they position the category with consumers.
When operating in a crowded, highly competitive landscape, the power of a brand can take on a life of its own. Makers and marketers of bottled water, for example, have perfected every aspect of product differentiation to help distinguish what may be the world’s purest expression of a commodity. The fast-moving sparkling water market is driving healthy appetites with consumers by continuing to reinvent themselves through flavor profiles, and most recently, the addition of alcohol, caffeine and cannabis. Of the many brands doing it well, La Croix has been remarkably successful at building a strong brand platform that is supporting continued product development and driving rapid gains in market share.