In business literature, commoditization is defined as the process by which goods that have economic value and are distinguishable in terms of attributes ( uniqueness or brand) end up becoming simple

commodities In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a comm ...

in the eyes of the market or consumers. It is the movement of a market from differentiated to undifferentiated price competition and from monopolistic competition to

perfect competition In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In Economic model, theoret ...

. Hence, the key effect of commoditization is that the

pricing power In economics, market power refers to the ability of a firm to influence the price at which it sells a product or service by manipulating either the supply or demand of the product or service to increase economic profit. In other words, market powe ...

of the manufacturer or brand owner is weakened: when products become more similar from a buyer's point of view, they will tend to buy the cheapest. This is not to be confused with

commodification Within a capitalist economic system, commodification is the transformation of things such as goods, services, ideas, nature, personal information, people or animals into objects of trade or commodities.For animals"United Nations Commodity Trad ...

, which is the concept of objects or services being assigned an exchange value which they did not previously possess by their being produced and presented for sale, as opposed to personal use. One way to summarize the difference is that commoditization is about proprietary things becoming generic, whereas commodification is about nonsaleable things becoming saleable. In social sciences, particularly anthropology, the term is used interchangeably with commodification to describe the process of making commodities out of anything that was not available for trade previously.Greenwood, D.J. (1977). "'Culture by the Pound: An Anthropological Perspective on Tourism as Cultural Commoditization". In ''Hosts and Guests'', ed. V. L. Smith, pp. 129-139. Philadelphia: University of Pennsylvania Press. Commoditization can be the desired outcome of an entity in the market, or it can be an unintentional outcome that no party actively sought to achieve. (For example, see Xerox#Trademark.) According to

Neo-classical economic theory Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good ...

, consumers can benefit from commoditization, since perfect competition usually leads to lower prices. Branded producers often suffer under commoditization, since the value of the brand (and ability to command price premiums) can be weakened. However, false commoditization can create substantial risk when premier products do have substantial value to offer, particularly in health, safety and security. Examples are counterfeit drugs and generic network services (loss of 911).

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