Chapter 5 for Spring 2011 - Product Differentiation Chapter...

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Unformatted text preview: Product Differentiation Chapter 5 Product Differentiation Product differentiation: A business-level strategy whereby firms attempt to increase the perceived value (i.e., benefits) of their products or services compared to the perceived value (i.e., benefits) of competing firms’ products of services Greater perceived value (i.e., benefits) allows the firm to charge higher prices than the typical firm in the industry Higher than typical prices allows for above normal returns (i.e., competitive advantage) 2 Product Differentiation Perception is reality Differentiation can come from unique objective properties of product or service, but … Product differentiation is ultimately a matter of customer perception Customers can see differences that aren’t significant E.g., the perceived versus real brewing processes of some micro- breweries Customers can fail to see differences that are significant E.g., most customers may be unable to distinguish a great wine from an ok one 3 Bases of Product Differentiation Three basic bases of differentiation (1) Attributes of products/services (2) Relationship between firm and its customers (3) Linkages within firm or to other firms 4 Bases of Product Differentiation (1) Attributes of products/services (1) Product features E.g., car industry—product features are constantly being modified (2) Product complexity Special case of product features E.g., Cross or Mont Blanc pens versus BIC pens (3) Timing of product introduction First-mover can sometimes use status as first-mover to create perception of extra benefits (4) Location E.g., Disney in Orlando 5 Bases of Product Differentiation (2) Relationship between firm and its customers (1) Product customization (to customer needs) E.g., enterprise software companies (Oracle, SAP) customize basic packages (2) Consumer marketing Using advertising, etc. to alter current and prospective customers perceptions of product/service E.g., Mountain Dew • Old slogan: As light as a morning dew in the mountains • Radical repositioning with no product change (3) Reputation 6 Bases of Product Differentiation...
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This note was uploaded on 04/01/2012 for the course MGT 4893 taught by Professor Staff during the Spring '08 term at The University of Texas at San Antonio- San Antonio.

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Chapter 5 for Spring 2011 - Product Differentiation Chapter...

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