Commodities vs Brands – Marketing Pros and Cons

Commodities vs Brands – Marketing Pros and Cons

The Dollar Shave Club proved that even the most mundane of commodities can be turned into a strong brand. Let’s take a closer look at the marketing pros and cons of commodities vs brands.

Commodities vs Brands: Which one sounds more like your business?

What is a Commodity?

When considering the question of whether your marketing tactics should be geared for promoting commodities vs brands, you need to differentiate between the two. Commodities are “something that is bought and sold” or “something that is useful or valued.” (Mirriam-Webster)

Pretty vague, right?

That’s really the point. Commodities are goods and services which are useful and valuable (to buyers). Commodities are goods and services which are usually widely available and offered from multiple brands. However, no matter which brand name of a commodity is purchased, they are roughly equivalent. The main differentiator among commodities is price; when it comes to the buying decision, brand is nothing.

What is a Brand?

A brand, on the other hand, is one of a kind. It can be defined elegantly by one word, a “mark.”

This mark is everything.

In one symbol or brand name, it conveys value, qualities, characteristics, reputation, performance and more. Seth Godin defines it as “the set of expectations, memories, stories and relationships that, taken together, account for a consumer’s decision to choose one product or service over another.” He goes on to say that if buyers aren’t willing to pay more, choose one over another or promote a brand by word of mouth, then the brand has no intrinsic value.

Weighing the Pros and Cons of Marketing Commodities vs Brands

Difficulty: Advantage – None

Effectively marketing both brands and commodities is hard.  Effective marketing is hard. Consumers and B2B buyers have many choices, they’re savvy, they are self-educating, they have access to reviews, comparison charts, ratings, social commentary and more.

Marketing commodities is hard because there are few ways to differentiate one over another. The brand with the most advertising dollars, the brand found first or the one with the lowest price is often the winner.

Building a strong brand is hard because even if products and services are unique, the market place is crowded with direct and indirect alternatives. The brands with the most stars, influential spokesmen, mentions, advertising dollars, best placement in search results, best company story, fastest viral content, biggest social following – or any number of other factors – might win.

Customer Acquisition: Advantage – None

An argument can be made that the universally-understood nature of commodity goods and services makes client acquisition easier; however, the competitive market place most commodity marketers must navigate makes it more difficult for one brand to gain an advantage over another, minus price or marketing budget differentiators.

Building a strong brand takes time and resources, which might make initial marketing costs higher and which might make the buying process longer; however, the long term benefits of brand awareness, loyalty and lower cost of repeat purchases may negate any real difference.

Word of Mouth: Advantage – Brands

People don’t talk about commodities unless someone’s asking where to get the cheapest <insert type of goods here>. People talk about brands when its goods or services fail to meet or exceed buyer expectations. People talk about brands when they feel like identifying with or rejecting a brand impacts the way others view them. People talk about brands when supporting or boycotting one is reflective of their personal values or beliefs. People talk about brands when one stands out from the rest in ways that are especially meaningful to them, personally.

While we’re giving the word of mouth marketing advantage to brands here in this commodities vs brands pros and cons, let’s not overlook the fact that it’s a two-faced coin. Negative brand interactions lead to negative word of mouth, which can diminish brand value, sometimes overnight.

Customer Retention: Advantage – Brands

While commodities may earn repeat purchases over and over again, they can just as easily be supplanted by rivals offered at a lower price or with more perceived value (options, upgrades, innovation, etc.) Commodity producers must be conscious of industry advances and market place prices in order to ensure their goods or services remain competitive.

Marketers that succeed in building a strong brand earn buyer loyalty. Brand loyalty can render competitor’s price, quality and value differentiators irrelevant. Though initial marketing costs for building a strong brand might be higher, the payoff in repeat purchases and long-term customer retention is worth it.

Pricing: Advantage – Brands

As we have already mentioned, commodities generally compete on price. Strong brands can charge a premium for their goods or services that their customers are willing to pay. Strong brands also merit positive word of mouth that lowers the cost of customer acquisition. Increased customer retention results in lower cost of promotion for future sales and makes it easier for a company to sell add-ons, upgrades and earn re-sells when items obsolesce.

Commodity goods and services have to be sold over and over, brands may only need to sell a loyal customer the first time. The decision to promote your company’s goods or services as commodities or work to build a strong brand reputation will impact the future of your business in nearly every aspect, so it’s not one to be taken lightly. Plus, even if you have promoted your business as a commodity in the past but you want the benefits a strong brand enjoys, it’s not too late to change course.

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