Commoditised or non-commoditised, which is the right path for your service marketplace?

Commoditisation: What is it?

Classifying a service into commoditised or non-commoditised can be a tricky. While there is no absolute definition that helps you place your offerings into the first bucket or the latter, we believe the answer to one key question can give you a fair idea:

💡 “Is the service defined enough to be purchased online without prior discussion?”

There is a range of inputs that goes into determining the scope of a service and its completion ie. the costs, conditions, timings, customers willingness to pay, labour charges.

If customers are able to get past all of this by themselves and follow through to commit and pay for your service without having to speak with you, it would make it a commoditised service. Here, the key drivers that impact a customers decision have been rightly identified, and any information relating to them is either readily provided on the platform, or already known to the customer. Thus, eliminating the need for discussion prior to purchase. The steps to avail these services are usually identical and have been standardised, even though the experiences may vary. For example, while booking a hotel stay, the customer needs to know the dates and the number of nights to make his reservation for both a 2-star or a 5-star hotel. While the initial input required from the customer remains constant in both cases, his/her experience would drastically differ.

While answering the above question it is important to note that there is a special emphasis on the word purchase. There may be communication required for the completion of the service, but because implementation occurs after the purchase and outside the online platform, it isn’t highlighted.

As a business owner, commoditisation is not a ‘Either/ Or’ classification for all your offerings. You may have certain commoditised services while the rest are still non-commoditised, that is upto your discretion. More often than not, business owners tend to commoditise their best selling services.

Can we commoditise all services?

While the intuitive answer to this question may seem like yes, you’d be surprised to know otherwise. To understand this we go back to the concept of identifying the key drivers that impact the customers decision of purchase. While it may be possible to enlist these factors and their possible answers in some cases, it may become challenging for some other.

For example, you’re someone that needs to get your attic redesigned. You’re likely to require an interior designers help for this. However, you will not be able to purchase his/her service before you communicate/have an initial meeting with them to describe the attics current condition, your taste, your budget etc. This is because the service would be priced based on your answers. These drivers tend to be highly variable for different people, thus making the service non-commoditisable.

Should you commoditise your service?

This is a personal choice that a vendor should make considering what fits their situation the best. Below we look at the benefits and challenges of both cases:

There is also always the option of starting out with your services as non-commoditised and then converting them to commoditised. This way you can realistically understand your target market, and their needs, and build a customised framework to determine the key drivers to make your service commoditised.

Service marketplaces: the bright side

Why go for marketplaces?

Visibility & brand awareness: Listing on a marketplace can provide reach to a wider variety of customers. While a loyal client would know your brand and continue recommending it, the reach wouldn’t go too far. However with a marketplace you can reach customers that you have never crossed paths with before, or potentially try new demographic niches to discover new sales opportunities. Further, SEO is a cherry on the cake. It allows you to test keywords and ad campaigns with your service listings and discover what attracts the most traffic in a marketplace!

Trust: Marketplace owners provide the infrastructure, and usually approve/filter community of vendors conducting business within that infrastructure. If customers trust this well known intermediary, they’re open to availing services from unknown vendor as well which would’ve been otherwise impossible if it was to be sold on your independent unknown web-store.