In business literature, commoditization is defined as the process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) become simple commodities in the eyes of the market or consumers.
It is the movement of a market from differentiated to undifferentiated price competition and from monopolistic to perfect competition. Hence, the key effect of commoditization is that the pricing power of the manufacturer or brand owner is weakened: when products become more similar from a buyer’s point of view, they will tend to buy the cheapest.
This is not to be confused with commodification, which is a Marxist term for things being assigned economic value that they (according to Marxist theory) did not previously possess by their being produced and presented for sale, as opposed to personal use.
One way to summarize the difference is that commoditization is about proprietary things becoming generic, whereas commodification is about nonsaleable things becoming saleable.
In social sciences, particularly anthropology, the term is used interchangeably with commodification to describe the process of making commodities out of any thing that did not use to be available for trade previously.