Many ways to differentiate the product or service and

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Many ways to differentiate the product or service and buyers perceive these differences as having value Few rival firms are following a similar approach Technological change is fast-paced and revolves around evolving features 15
Various Themes on Differentiation Unusual or unique features – Dr. Pepper Responsive customer service – FedEx, Ritz-Carlton Rapid product innovation – Apple Multiple, additional features – Microsoft Office Engineering design and performance – Mercedes, BMW Prestige and status – Rolex Superior quality (product reliability) – Johnson & Johnson Quality manufacture – Michelin, Lexus Advanced technological features – 3M Corporation Top-of-line Image – Ralph Lauren, Chanel Spare parts availability – Caterpillar 16
The Sources for Advantage via Differentiation 17 1. Focus directly on attributes Product features, product complexity, timing of introductions, location 2. Focus on relationship to consumers Product customization, consumer marketing, product reputation 3. Focus on links within or between firms Links between functions within firm, links with other firms, product mix, distribution channels, service and support Product features Product mix Links with other firms Product customization Product complexity Consumer marketing Links between functions Timing Location Reputation Distribution channels Service and support Easier to Duplicate Costlier to Duplicate Source: Caves, R.E. and Williamson, P. (1985). “What is product differentiation, really? Journal of Industrial Economics , 34, pp. 113-132.
Activities as the Basis for Differentiation Opportunities exist in value chain activities: Purchasing and procurement activities (SCM) Product R&D and design Technology-related activities Manufacturing activities Distribution-related activities Marketing and customer service activities Keys to competitive advantage: New product innovation Technical superiority Product quality and reliability Quick delivery Comprehensive customer service Unique competitive capabilities 18 Managers need a keen understanding of the sources of differentiation and the activities that drive uniqueness to devise a sound strategy Link together?
Differentiation: Brand loyalty and decreased price sensitivity insulate from intense competitive rivalry 19 Five Forces Model of Competition Customer loyalty to unique attributes raises entry barriers New entrants have to invest considerable resources As loyalty increases, price sensitivity decreases Louis Vuitton wallet High quality components drive up costs and potential leverage, if a source of differentiation If competitor is providing a unique product, scope exist for passing along input price to the buyers Customer loyalty positions firm against product substitutes Unique features = loyalty As long as the firm satisfies customers, it can insulate from price-based competition
Competitive Risks of a Differentiation Strategy Charging a price premium buyers perceive as too high

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