Commoditized marketplaces: which category do your services fit into?

Commoditised marketplaces: A Quick recap

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.

Digging Deeper: Classification of Commoditised marketplaces

As we’ve seen, commoditization of a service mainly depends on if it can be purchased without prior discussion. This can be done only if the price is predefined. Thus, the best way to classify commoditized marketplaces is to understand how the price was determined. We further understand these classifications based on service start times and duration. There are 3 main categories:

Flat Rate: Here, there is a fixed amount that is set for the service and it is independent of the duration of the execution. The vendor decides the available time range within his calendar for the periods the service can be offered. The execution/duration of these services is also defined by the vendor, however the customer has control over when he/she would like to commence the service. Booking a flat rate service can be done at any moment within the available range if [TaT] ≤ [service start] – [next unavailability start] For example, if you require a haircut, theres a certain time range in the day when a hairdresser is open for business – 10am to 5pm. It is you who then decides when in this 7 hour period would you like to avail this service. Lets say you decided to go at 1pm for the haircut. The time taken for the completion of this haircut would depend on a lot of factors (hairdressers efficiency, condition of your hair etc) and thus cannot be set in stone, making it dependent on the vendor.

Seat Based: The price for a seat based model typically depends on the access (usually per person) that a customer receives. The start time and duration of this access is vendor defined. An ticket to the movie playing in your nearest theatre, or a concert are the kinds of services that fall into this category. Here, the services is usually provided to a wider audience or a group of customers at the same time. Thanks to this, seat based services can be purchased only at the beginning of the availability range and not anytime halfway through the availability.

Time Based: These services define their pricing structure based on a per unit time metric. The time can the measured based on minutes, hours, or even days/nights. It is the customer that defines the commencement of the service and for how long they’d want it to last. He/she also has the option of booking a single slot within the availability range, a longer range, or several non-sequential slots. A good example for this scenario would be hiring a lawyer or even booking a stay at a hotel.

A classification Checklist

Type of Commoditised ServicePricing StructureService StartService DurationService Booking
Flat RateFixed amount independent of any variablesCustomer decidesVendor definedAt any moment within the available range if:

[TaT*] ≤ [service start] – [next unavailability start]
Time BasedBased on per unit timeCustomer decidesCustomer decidesCan book a single slot within the availability range, a longer range, or several non-sequential slot.
Seat BasedLumpsum amount for the entire serviceVendor definedVendor definedOnly at the very beginning of the availability range