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Also known as: commodity trap, race to the bottom

Commoditization

TechnicalStrategiesFinance

Definition

Commoditization: Commoditization is the process where products become interchangeable, competition shifts to price, and margins erode. It threatens companies relying on features that become table stakes. Fighting commoditization requires continuous innovation, strong relationships, or shifting to different value dimensions.

Example Usage

“As basic CRM became commoditized, we shifted from selling features to selling outcomes—implementation services and success programs command premium prices.”

Common Misconceptions

Better features prevent commoditization. Features are copied quickly; sustainable differentiation requires more.
Price competition is inevitable. Companies escape commoditization through service, experience, or business model innovation.
Commoditization only affects physical goods. Software features commoditize rapidly; cloud infrastructure commoditized in years.

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