Product Types

Each product type has its own characteristics for the cost-price-value model. See Fig. 3.2a.

Electricity, grain, milk, iron, copper, PVC, etc. are called commodity products. The are primarily bought on the bases of the lowest price. For a certain grade, or quality standard, of such a commodity there is not such things like service quality or image. That is the reason that for such products the margins between the cost, the price and the value are very low. These products suffer from extensive trading and speculation, resulting in volatile prices. The business strategy for these products are characterized with high volume, low margin.

Top Quality products and services (like jewels, perfumes, sports cars, diners in restaurants) are characterized by a 

Figure 1.2a. The difference between commodity products and ‘top quality’ products is the margin

high quality level of services and a top level image. They are bought on the basis of the perceived value. Not easy to copy, and with a niche market strategy with low volume, high margin.

Most consumer products have characteristics which are in between these extremes.