STRATEGY 411 Lecture Notes - Lecture 8: Brand Equity, New Coke, Multidimensional Scaling
Document Summary
Differentiation advantage occurs when a firm is able to obtain from its differentiation a price premium in the market that exceeds the cost of providing the differentiation. By understanding what customers want, how they choose, and what motivates them, we can identify opportunities for profitable differentiation. For products that are technically simple (socks), that satisfy uncomplicated needs (a nail) or must meet rigorous technical standards (thermometer), differentiation opportunities are constrained by technical and market factors. Products that are technically complex (airplane), that satisfy complex needs (vacation), or that do not need to conform to particular technical standards (toys), have more scope for differentiation. Ex. starbucks ability to charge up to for a coffee is not just due to characteristics of the coffee, Tangible differentiation: observable characteristics of a product or service that are relevant to but on the overall starbucks experience customers" preferences and choice processes.
