Difference Between Commodity and Product
Most of us know that if you have a commodity, the way people differentiate you is by price alone. Most businesses can't compete based upon that. How many businesses can have the lowest prices.
Of course if you consider consumable goods, you can look at convenience stores which offer the same things that grocery or department stores may offer at a much higher price. People are willing to pay for the convenience and saving of time.
Drucker has a simple definition for how to define if you're offering a commodity or not: it is being differentiated in the value it offers the consumer.
Taking the convenience store example again, the exact same products and brands are offered at much higher prices, it's the value of the convenience which differentiates the service from other less expensive stores. That's why convenience stores aren't commodities in most cases, and so don't have to compete on price with lower-priced rivals.
Another way Drucker explained it was in buying a house. When thinking of a house, they will all have a certain number of rooms, places to sleep, a kitchen etc. Even if these characteristics are identical, the woodwork, flooring, walls, fireplace, door and windows can be completely different in style.
So those that offer up what Drucker calls products - the term Drucker uses to differentiate from a commodity - are able to capture the imagination of consumers by style, and other creative things that add value to their offerings.
This is one of the reasons why Steve Jobs and Apple, in spite of an inferior marketing plan which doesn't open up their products or services to others, is able to recreate themselves over and over again, and have buzz always surrounding what's going on in products in the works at the company all the time.
When you have people waiting for what you're going to bring to the market before they buy, you don't have a commodity, but what Drucker calls a "product."
Find these types of key things that add unique value to the consumer and you'll be able to roll out products and services that a certain portion of the population (your customers) will only buy from you. That's how you beat the commoditization cycle.
Other Peter Drucker Resources:
The Man Who Invented Management
Beyond the Information Revolution
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