A commodity product refers to any product which is similar to other products of the same variant (that are available from other manufacturers). For instance, sugar can be termed as a commodity product. Being a commodity product, no other company has better chances of controlling the supply rate and price levels of sugar other than any rival of the sugar company. The idea of the commodity product is closely related to many facets of branding and product spreads. Due to this reason, it is quite difficult to differentiate between these commodity products. A commodity product works only for some selective brand models.
What is a commodity product spread?
While studying about commodity products, we are likely to come across the definition of the commodity product spread. A commodity product spread is calculated by the difference between the price of any raw material and the price of a finished product which is created from the raw material. For instance, the difference between the price of raw crude oil and the final price of refined oil materials can be termed as the commodity product spread. A general and conventional commodity product spread is often called the ‘crack spread’.
A common trend in the futures market is to bet on the impending changes in the commodity product spread. This trade is extremely handy for all those firms that convert the initial raw materials to final products. These firms have the liabilities to purchase the commodity future and finally sell the product futures, thereby hedging some risks and assisting to lock the profit margins.
Which brand model works for commodity products?
The market has to be at such level of maturity where the level of consumerism is unconventional. Here consumerism should be in such a way where the type of purchase directly leads to the choice and convenience of the purchase. Only in such a unique market environment, the brand models will effectively work for the commodity products. According to some researchers, the Middle Easter countries have finally reached this point thereby letting the manufacturers to successfully and effectively brand all the commodity products that are sold in bulk amounts.
Why should commodity products be branded?
Well, branding the commodity products is kind of escaping from the process of competing on the volume and price of the product. Brands play a vital role in differentiating products. They even enhance the value of the product beyond the basic functional features. They build a couple of preferences concerning the competitive products, thereby creating a sustainable and competitive advantage in the long run. This is vital in those environments where the competition is intensifying with each passing day.
We can take an example in this regard. For instance, Evian is one of the most popular and also best selling bottled water across the globe. But this does not necessarily mean that this brand is the best-bottled water in the world. On the contrary, it shows that the company has effectively managed to differentiate its brand from another popular brand with their unique taglines and brand propositions.