An Abundance of Sweet Creamy Liquid Stimulants

I recently came across a blog dedicated to using simple lines and dots and words to making sense of stuff. It's a blog called Indexed, published by Jessica Hagy. I found this index card particularly insightful.

This diagram says that in a commodity market, artistry is useless. In a specialty market, artistry is profitable.

Here's why I think it's insightful.

Hagy titled this card "Ordinary is Abundant," which I take to mean the forces of commoditization are stronger than ever. In other words, it is hard to sustain brand differentiation when there is an abundance of competition.

Easy to understand. Like Starbucks and other premium coffee shops having trouble carrying a premium price on their specialty coffee drinks when Dunkin' Donuts has their own and McDonald's launched McCafe, with extremely similar products at a lower price.

Sweet Creamy Liquid Stimulants

McCafe serves some pretty tasty lattes, cappuccinos and other frothy drinks. The hazelnut iced coffee is a favorite of mine during the summer. McDonald's probably saw that the Starbucks business was a specialty market but the perception of the coffee product was moving more towards commodity.

After all, the real product they're selling is sweet, creamy liquid stimulants. The "specialty" for Starbucks is environment and place. If they're going to survive, they need to leverage that better, or find another point of differentiation.

The Wikipedia entry on Commodity is really insightful. Here are the main points:

• A commodity is some good for which there is demand, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it.
• The price of a commodity good is determined as a function of its market as a whole.
• Commoditization occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for market participants have become commodities, such as generic pharmaceuticals and silicon chips.