•
Th
e r
ev
ival of Sta
rbu
ck
s'
fo
rt
unes
a
ft
er
th
e
return
of
Howard
Schu
ltz as CEO
in
2
008
was
the r
es
ull
of
a reinvigoration of the "
Starbucks
Experie
nce
"
th
rough
re
co
nn
ec
ti
ng
with c
ustomers
, r
ee
mph
as
iz
ing
the
my
s
tique
of
g
oo
d
coffee
,
and
ren
e,Ying ~ta
rbu
cks'
co
mmitment
to
soc
ial a
nd
en
vironme
nt
al
r
es
po nsibil
it
y.
Signaling
and
R e
putation
Differentiation is only e
ff
ec
tive
if
it
is
co
mmuni
ca
t
ed
to cu
stomer
s. But info rma
ti
on
ab
out the qualiti
es
and
c
hara
cte
ri
stics o f
produ
cts is
not
al
ways
r
eadi
ly a
,a
il
able to potelllial
custom
ers.
Th
e
eco
no mi
cs
lit
er
arure
dis-
tin
guish
es
betw
ee
n
s
ear
ch
goo
ds,
wh
ose
qualiti
es
and
ch
aracte
ri
sti
cs
ca
n
be
as
ce
r-
tained
by in
,pecl
ion, a
nd
e.
~p
erie
11
ce good
s,
wh
ose
qualiti
es
and
ch
arac
teristics
are
o nly r
ecognized
a
ft
er
co
nsumption. This latter cla
ss
of
go
ods
include
s
medi
cal se
r-
vi
ce
s, bald
ness
treatments, fr
oze
n 'IV
dinn
ers,
and
wine. Even after
pur
ch
ase.
per-
formance attribut
es
may be sl
ow
in r
evea
ling them
se
lves. Bernie
Madoff
es
t
ablis
hed
ue
rnar
d
L.
Ma
tloff Investment
Sec
uriti
es
LLC
in
1
960-
it
t
oo
k
48
years befo re
rhe
ren
ow
n
ed
investment hou
se
wa
s
re
vealed
as
a "giant Ponzi
sc
heme."
'"
In t
hc
ter
min
ol
ogy
of
game th
eory
(see
C
hapt
er 4), the
market
for
ex
pe
ri
en
ce
g
oo
ds co rr
es
p
_o
nd
s to a classic pr
isoner
s· dile
mma
. A firm
ca
n
offer
a
high
-
quality
or
a .
low-q
uality
produ
c
1.
The custo
mer
can
pay
either a high o r a l
ow
pri
ce.
If
qua
lny
c
annot
he de1
ec
1ed, then
eq
uilibrium is
estab
lishe
d,
with
th
e
customer
o ffe
nng
a l
ow
pn
ce
and
the s
upplier
offering a
lo
w-c
1
ualitv
pr
o
du
ct
eve
ti
h
b
h
I I I
I
'f
,
,
n
1oug
ot
wou
c
Je
Jeller of " "ith a high-
qu
a
li
ty
pr
o
du
ct
so
ld
at
a h · I
.·
Th
..
/
·
f 1 ·
1
·1
-
1g
1
p11
ce
.
e
11;
,.
,o
ut,on o t
11
s c
I
e
mma
is for
pr
o
du
ce
rs 10 find
some
c
redibl
e
mean
s
of
signal-
ing
qu
:
da
y to the customer.
The
m
os
t
effec
ti
ve
signals arc
th
ose
that
ch·
th
pay
o
ff.
,
111
the
pris
o ners· dile
mma
.
Thu
s.
an
e
xt
e
nd
ed
warrant
y is e ffec
ti
ve
a~;
C~
tU
S:
~
CHAPTER 7
THE
SOURCES
AND
DIMEN
S
ION
S
OF
CO
M
PETITIVE
ADVANTAGE
p r
ov
iding
such a
warranty
wou
ld
be
more
ex
pe
nsi
ve
for
a l
ow-q
ualit
y
producer
th
an
a
high-q
uali
ty
produ
c
er
.
Brand
name
s,
wa
rrant
ies, e
xp
e
nsi
ve
p
ac
k
agi
ng ,
m
oney
-
bac
k g
uarantees,
sponso
rs
hip
of spo rts a
nd
cu
ltu
ra
l
eve
nt
s,
a
nd
a
ca
re fully
d
esign
ed retail
env
i
ronment
in
which
th
e
prod
uct is
so
ld
are
a
ll
s
ignals
o f
qua
li
ty
.
Th
eir
effect
iveness
ste
ms from
th
e
fa
ct
th
at
th
ey
re
pr
ese
nt
s ignifi
ca
nt
in
vestme
nt
»
by
the
ma
nufa
c
turer
that
will
be
deva
lu
ed
if
the
product
proves
un
sa
ti
sfac
to ry
to
cu
st
o
mers
.
