Pricing Related Guides
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Commoditization is the tendency for certain types of products and services to become a commodity over time. This means that customers begin to purchase the lowest price item every time as they view products in a category as more or less the same. The following are common examples.
TechnologyA new and innovative technology may command a high price as long as customers remain interested in new features and improvements. If customers lose interest, the product becomes a commodity that people purchase on price alone. For example, between 1975 and 1985 videocassette recorders were reasonably expensive with prices approaching $1000. There was a significant price difference between models with customers paying significant premiums for advanced features. By the 1990s, prices had fallen dramatically to the $50 to $100 range with marginal differences between top brands and generic equivalents.
FoodAgricultural products are typically viewed as a commodity. However, it is possible for farmers to command premium prices by marketing food of superior quality. For example, grapes for wine making aren't considered a commodity as some terroirs command a significant price premium.ServicesService industries such as airlines can be intensely price competitive as customers tend to choose the cheapest flight.
FashionFashion faces commoditization pressures as fast fashion firms identify fashion trends and get them to market quickly at a low price. In many cases, fashion brands are able to command high prices based on brand legacy and brand image that give the brand social status that some customers value.
Pricing
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