Cost Of Living Contented Dad on 18 Jan 2009 10:48 pm
Commodity Purchasing
In one of Tristan’s recent posts he discusses ways of reducing your shopping bill to free up cash for investment.
One way to identify those items that are probably best suited to the “own brand” type of saving are those that are everyday commodities.
What do I mean by this? Well think about what we generally mean by a commodity.
Anything that is a basic product or feedstock and that is difficult to differentiate is typically a commodity. Think of oil, metal ores, coal, grains and such like.
What has this to do with our shopping?
One of the best examples of everyday commodity purchasing has always been washing powder. The chemicals contained within a box of washing powder are typically no different from one brand to another.
How can you be pretty certain about this?
Take a look at the effort and budget that the various manufacturers put in to trying to convince us that their product is better than their competitors’. The bigger the budget, the smaller will be the real difference between competing products.
One more reason to go with the “own brand” offering – the only real differentiator in this range of products is price!
The same logic can be applied to an amazing variety of products from those as complex as cars or electronic goods to cosmetics.
I can remember the days (long ago), when the cognoscenti used to make disparaging comments about the early Japanese car imports to the UK. Those few that actually looked at them from an unbiased viewpoint soon realised there was a great deal to be said for them in terms of value for money. Where are the great marques of those long ago days? Mostly just a memory, or like Mercedes languishing low in the reliability surveys in comparison to these upstarts.
What is the point of this?
Simply that the size of the marketing budget is a good, if not infallible, pointer to the lack of differentiation between competing products.
Finally, I well remember an erstwhile colleague, who in the process of buying a new car drove us all mad interviewing us in depth about the relative merits of the current offerings and our own experiences with particular models. When it came to my turn to be interrogated, I simply told Joe that he was wasting his time and ours – he was going to buy the car that he found attractive, that fitted his budget, that made him feel good about himself, and was big enough to carry his ever expanding family. Was I right?
Of course I was, that’s what we all do with very few exceptions. Be that exception and save yourself some of your hard won cash!
