Question

Given the commoditized nature of many markets today, does customer relationship management—and its associated focus on quality, value, and satisfaction—make sense? If price is the only true means of differentiation in a commoditized market, why should a firm care about quality? Explain.

Answer 1

Case Specifics:-

Question

Given the commoditized nature of many markets today, does customer relationship management—and its associated focus on quality, value, and satisfaction—make sense?

Markets, in today's fast paced economic conditions are increasingly become commoditized in nature. This means that the amount of differentiation among them is increasingly decreasing. A new technology is keenly adopted by ones competitors and similar products are readily available, sometimes at lesser costs.

In such conditions of cut throat competition, the role of concepts like branding and customer relationship management have become increasingly important.

Customers have become harder to retain because of the variety of choices available and pricing being an important element of the overall purchase decision for the consumer.

Because of the fact, that the nature of market is changing, the concepts of customer relationship management, add brand value and power to the products which otherwise doesn't exist. Consumers tend to rank brands in today's life and would readily purchase the brand they relate with even when the product in itself seems to be similar.

For example:-

Tooth paste, in today's time is a commoditized item. All producers produce the same kind of products and they are similarly available at similar price points. Still brands such as Pepsodent, Colgate etc. sell more than that of local manufacturers. One reason being their superior brand power, and another being the customer relationship management which in the advent of issues is readily available to the end consumer.

If price is the only true means of differentiation in a commoditized market, why should a firm care about quality? Explain.

The reason why firms in a commoditized market should care about quality of the product, and other similar aspects is because customers cannot be retained by price alone. Even when they might buy the product once for being offered at a relatively cheaper price than the competitors, yet their repurchase decision would be taken on the basis of attributes of the product and the overall experience which they got while purchasing the product respectively.

To add brand value and to allow repurchase to happen and customers to stick to one’s brand, concepts such as customer relationship management, and increased quality are thus important and must be readily implemented respectively.

Please feel free to ask your doubts in the comments section.