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Customer needs

Managing Customer Relationships

"One reason so many products and/or markets are plagued by commoditization is that firms try too hard to tie customers' needs to the core product."

1. What are some examples that confirm and/or refute the above hypothesis?

2. Should firms focus on offering solutions to customers' problems, i.e. their multidimensional needs?

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1. What are some examples that confirm and/or refute the above hypothesis? 2. Should firms focus on offering solutions to customers' problems, i.e. their multidimensional needs?

Student: Kindly note that the answers to both the parts of the question is integrated.

As product lifecycles become increasingly shorter many products quickly reach commodity status where price becomes the single biggest buying driver.

source: http://www.zigzagmarketing.com/totm.asp?ID=19

This is quite evident in many product segments or industries, such as computing and home electronics, where companies are offering new and innovative products on a daily basis, flooding the market with similar offerings and making the olders obsolete on a regular basis. Thus, consumers are left with making a choice among a wide range of similar products, each one being almost similar in terms of features, quality,etc. Thus, the only factor which drives the buying is the price of the product.

Therefore, it is quite evident that in order to deliver a product that best meets the needs of the consumers, companies' try too hard and result in offering products similar to other offerings. In other words, they lose all their creative and innovation while trying to meet customer's needs.

Product commoditization isn't anything new. It's been going on ever since there was trade between countries. What's different now are both the speed with which it happens and the global extent to which it spreads. Advances in information technology, in logistics and management theory mean that we can now cost-effectively source products from halfway around the world. With global access at their fingertips increasingly savvy customers continue to drive product margins into freefall.

source: http://www.zigzagmarketing.com/totm.asp?ID=19

To start to understand this dilemma, we need to take a hard look at the three driving forces of commoditization:

1) Advances in technology

2) Lack of connecting unique value to customer's business drivers

3) Pressure on buyers to make quality buying decisions

Companies are constantly seeking differentiation by upping the ante in technological advances. When the ante continues to escalate, you may find yourself playing not only against the advances of your competitor ...

Solution Summary

"One reason so many products and/or markets are plagued by commoditization is that firms try too hard to tie customers' needs to the core product."

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