Abstract
This conceptual paper discusses the phenomenon of differentiation made possible through branding or innovation or a combination of the two. Differentiation is eventually the driving force for the development of its own negation, commoditization. When customers have endured a commoditized market long enough the opportunities open up for creative destruction, this concept of Schumpeter (1942), means that an entrepreneur invents a completely new way of satisfying the customers’ unsatisfied needs, making the industry that no longer bothered about their customers. Many researchers have tried to re/brand destructive innovation as their own, with concepts, such as of ”transilience”, and “blue ocean strategy’, as opposed to ‘red ocean strategy’.
 The paper focuses on innovation as a differentiation strategy and on temporary monopoly rent as a driver of innovation. Increased competition and shortening and life cycles makes capitalism more volatile and the strategies to reduce the risks involved are discussed. These strategies lead to the real-world implementation of the concentration of capital forecasted by Marx and feared by Schumpeter.
 The paper identifies the need to continuously monitor the concentration of capital and to understand individual markets by studying the firm’s profit.
Highlights
The “market” concept is central in marketing, but we are often sloppy in defining it and explain the mechanisms regulating markets
Under the header Commoditization and creative destruction, we show how markets mature from competition and enter into a phase of slow change that eventually ends in what is called Creative destruction, when the industry is over-run by a newly arising industry
Classical economics (Smith, 1776/982; Malthus, 1798/1970; Ricardo, 1817/1971; Marx 1894/1970; and others) understood that there is a drive among capitalists to get more than the average profit. They recognized this as monopoly rent, a premium for being different, which meant that profits were re-distributed in the marketplace to the advantage of the company with a unique, and especially the most unique product
Summary
The “market” concept is central in marketing, but we are often sloppy in defining it and explain the mechanisms regulating markets. Different traditions in marketing rely on different perspectives on how to view the market and the mechanisms regulating it. Under Competition and differentiation we discuss how competition forces companies in general to differentiate their products and services, to reach higher profits. Under Innovation and Monopoly Rent, we discuss the extra-ordinary profit levels that can be achieved by successful radical innovation. Most needs are different for different customers, if we address these specific needs, we produce products and services which are differentiated, heterogeneous. Differentiation means that the product satisfies the need differently, through innovation, or better, because of quality. The firm that manages to produce such added value and communicate the extra value to customers reap higher profits in the marketplace
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