Chapter #5Product Differrentiation

Victoria’s Secret

• Who is Victoria?– Retired fashion model– Thinking about starting a new family– Has an adventurous sexy side– Loves good food, classical music and great wine– Travels frequently, at home in New York, Paris, LA or

London– Fashion tastes are edgy but never to the extreme– Sexy and alluring never cheap, trashy or vulgar– Beautiful and sexy, knows it is her brains not her looks

that have enabled her to succeed in life

• Created a lifestyle

Product Differentiation

• It’s about perception

• Sam Adams

• Rolex vs Casio

Ways firms can differentiate their products

• Directly on the attributes of its products or services, or…– Product features– Product complexity– Timing of product introduction– Location

Ways firms can differentiate their products

• On relationships between itself and its customers, or…– Product customization– Consumer marketing– Product reputation

Ways firms can differentiate their products

• On linkages within or between firms– Linkages among functions within a

firm– Linkages with other firms– Product Mix– Distribution Channels– Service and Suppor

Focusing on the attributes of a firm’s Product or Services

• Product Features

• Product Complexity– Bic– Mount Blanc– Cross

Focusing on the attributes of a firm’s Product or Services

• Timing of Product Introduction– First Mover

• Location– Disney World

Focusing on the relationship between a firm and its Customer

• Product Customization– Mountain Bikes vs Schwinn

Focusing on the relationship between a firm and its Customer

• Consumer Marketing– Mountain Dew– Pepsi– CocaCola– Fanta

• Reputation– Positioning

Focusing on Links within and Between Firms

• Links between functions– Effective multi-disciplinary teams

• Links with other firms– NASCAR

• Co-brand– Product placements

Focusing on Links within and Between Firms

• Product Mix– Products or services are technologically

linked – Single set of customer purchases several

of a firm’s products or services

• Distribution Channels

• Service and Support

Product Differentiation and Environmental Threats

• Entry

• Rivalry

• Substitutes

• Suppliers– Sugar

• Buyers– Quasi-monopoly

Product Differentiation and Environmental Opportunities

• Xerox & Paper

Ethical dilemma does a product do what it says it will?

– Lose weight– Hair loss

Product Differentiation and Sustained Competitive Advantage

• Rare Bases

• Imitability– Inform competitors– Product features

Substitutes for Product Differentiation

• Many of the bases of product differentiation can be partial substitutes for each other

• Using other strategies

3M

Can Firms be both low cost and differentiated?

• The argument for no– Stuck in the middle

Can Firms be both low cost and differentiated?

• The argument for yes– Successful innovation leads to

increased sales– Increased sales leads to lower

costs