Understanding Commoditization

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Questions and Answers

What is a major consequence of commoditization in mature industries?

Increasing profit margins

Rapid innovation

Slowing innovation and excess supply (correct)

Extensive product assortment

What is a key factor in the shift of power to customers in today's economy?

Growth of traditional media outlets

The astounding growth of the Internet (correct)

Increased marketing spending

Decreased product selection

What is a result of the massive increase in product selection in today's economy?

Marketers are exposed to inroads by competitors (correct)

Marketers have more control over customers

Customers are less informed about products

There is less competition in the market

What is a characteristic of mass media audiences in today's economy?

They are increasingly fragmented Signup and view all the answers

What is a result of the speed and efficiency of commerce in today's economy?

The way customers view value has changed Signup and view all the answers

What is an example of a commoditized industry?

Airline flights from Louisiana to Atlanta Signup and view all the answers

What is a key driver of consumer decision-making in commoditized industries?

Price Signup and view all the answers

What is a challenge faced by traditional businesses in today's economy?

Inroads by competitors from every corner of the globe Signup and view all the answers

What do customers tend to turn to when they see goods and services as commodities?

The most convenient, least expensive alternative Signup and view all the answers

What is a significant impact of technological changes on customer demand?

Shift in demand patterns for certain product categories Signup and view all the answers

What concern has been forced upon marketers due to technological advancements?

Real concerns about security and privacy Signup and view all the answers

What is a challenge faced by companies operating in multiple countries?

Unclear legal jurisdiction Signup and view all the answers

What is a critical success factor in marketing according to the 2005 American Marketing Association definition?

Value and customer relationship Signup and view all the answers

What is a broader perspective on marketing introduced in the 2006 revised definition?

Meeting human and social needs Signup and view all the answers

What is a basic marketing concept that involves acquiring something to satisfy a need or want?

Exchange Signup and view all the answers

What is an example of a product in marketing?

Goods Signup and view all the answers

Study Notes

Commoditization

Commoditization occurs in mature markets where goods and services lack differentiation, leading to price being the primary factor in consumer decision-making.
Examples of commoditization include Android-based smartphones and airline flights from Louisiana to Atlanta.

Challenges and Opportunities in Today's Economy

Power shift to customers: The growth of the internet has given customers access to information, allowing them to comparison shop and control their spending.
Massive increase in product selection: The internet has led to a staggering variety of goods and services, exposing marketers to global competition.
Audience and media fragmentation: The increase in media choices has led to fragmented audiences, making it difficult for marketers to reach their target audience.
Changing value propositions: Customers prioritize convenience and low prices, forcing marketers to adapt their strategies.
Shift in demand patterns: Changes in technology have shifted customer demand for certain product categories, such as the movie rental industry.
Privacy, security, and ethical concerns: Marketers must address concerns about security and privacy in both online and offline transactions.
Unclear legal jurisdiction: Marketers face challenges in navigating legal jurisdictions when doing business in multiple countries.

Definitions of Marketing

2005 American Marketing Association definition: Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and managing customer relationships.
2007 American Marketing Association definition: Marketing is an activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

Critical Success Factors in Marketing

2005: Value and customer relationship
2006: Meeting human and social needs, linking marketing to standard of living and society's well-being

Basic Marketing Concepts

Products: Something acquired through an exchange to satisfy a need or want
Goods: Tangible products, such as physical items
Services: Intangible products, such as experiences or expertise

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Description

Learn about the consequences of commoditization in mature industries, where slowing innovation and excess supply lead to low margins and price-based competition.