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AVOIDING COMMODITIZATION







When a product becomes easily interchangeable with other products of the same type, it is said to become a “commodity.” The process of a previously differentiated and specialized product becoming interchangeable is known as commoditization. While it is believed to increase overall economic efficiency, it can be difficult for individual companies to handle. Economic value and profits come from scarcity, whereas commoditization can curtail the potential for profit.




The idea of AVOIDING COMMODITIZATION


A famous example of commoditization is the microchip industry. While microchips started out as a specialized innovation that commanded a high price, they gradually became mass-produced and interchangeable. This commoditization altered the nature of the microchip industry, increasing competition, and decreasing profit margins.

Harrah’s Entertainment, a gaming corporation that operates hotels and casinos in America, recognized that traditional attempts made by casinos at avoiding commoditization—such as creating increasingly garish and noticeable designs—were becoming stale and ineffectual. It decided that the most effective way to avoid becoming an interchangeable commodity would be to establish an increased level of customer communication and gratification. A loyalty program was introduced where valuable customers were rewarded with significant gold-, platinum-, and diamond-level privileges. Harrah’s CEO Gary Loveman commented, “When





I started, this business was commoditized—you have a big box and gaming tables. Your challenge is to differentiate yourself from the other big boxes.”

While commoditization is viewed as the largely inevitable fate of many products, companies can increase their chances of avoiding it by differentiating themselves, recognizing when commoditization is about to occur, and taking steps to ensure their product remains on the cutting edge.


In practice AVOIDING COMMODITIZATION


1• Find new ways to make your product or service distinctive and avoid letting your product become an undifferentiated

commodity.

2• Ensure that some aspect of your product remains specialized, unique, and valuable for your customers.

3• Consider the potential for commoditization when deciding to invest in growth industries.

4• Utilize intellectual property protection laws and create products or services that cannot be easily mimicked by competitors.

The following articles should be taken into consideration

5 Ways to Avoid Commoditization in Your Business | David ...
How to Avoid the Commodity Trap - Harvard Business ...
How to Avoid Commoditization - Pricing Solutions
How to Avoid Commoditization - Insurance Thought ...
Rethinking strategy to escape commoditization
How to Avoid Commoditization in Today's Marketplace  ...
4 Tips To Avoid the "Commodity" Trap
commoditization, and how to avoid it! - Bona
Avoid The Commoditization Trap - Forbes
How to Avoid The Commoditization Trap - Badger Maps

Some external links for more knowledge

https://davidpaulcarter.com/2018/11/26/5-ways-to-avoid-commoditization-in-your-business/
https://hbr.org/2007/12/how-to-avoid-the-commodity-tra
https://www.pricingsolutions.com/pricing-blog/how-to-avoid-being-just-another-commodity/
https://www.insurancethoughtleadership.com/how-to-avoid-commoditization/
https://www.imd.org/research-knowledge/articles/rethinking-strategy-to-escape-commoditization/
https://hingemarketing.com/blog/story/how-to-avoid-commoditization-in-todays-marketplace-video
https://www.tmsatoday.org/index.php?option=com_dailyplanetblog&view=entry&year=2017&month=11&day=28&id=136:4-tips-to-avoid-the-commodity-trap
https://www.bona.com/Global/Division%20Industrial%20Coating/Interface/Interface%20December%202004%20English.pdf
https://www.forbes.com/2010/04/23/commoditization-trap-branding-leadership-managing-marketing.html

https://www.badgermapping.com/blog/how-to-avoid-the-commoditization-trap/
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