Differentiation and price premiums
Byron Sharp
Research Professor (Marketing Science), Director Ehrenberg-Bass Institute, Adelaide University of South Australia.
Reminder: when someone says differentiation should lead to a higher price that this is simplistic.?
Yes a higher quality product will cost more to make and buy (eg Ortiz anchovies).?But differentiation can also be in terms of lower quality and lower prices, eg Aldi is probably Australia’s most differentiated supermarket because of its limited range.
Differentiation is often just about being different (eg gluten free) which appeals to some and not others.? It may mean the price is higher, or not.
So the idea that differentiation automatically means higher price is a half-baked idea.?But popular.
PS for more (eg does differentiation increase profits) see:
40 years understanding brands from the consumer viewpoint; Director at Kantar BrandZ
1 年I think we're in strong agreement here: I've written up my thoughts https://www.dhirubhai.net/posts/gstaplehurst_difference-differentiation-kantar-activity-7100037662979280896-d88o?utm_source=share&utm_medium=member_desktop
Interesting that you navigated around the work done by insead on blue ocean strategy with this paper. Their first question is always to ask whether the differentiated feature would create new demand. To them, value innovation may mean reducing cost, as Aldi have done. I feel like your paper would be enriched by addressing their framework for flaws. Maybe a part 2.
Changing behaviour to change performance
1 年Shows the danger of reducing nuanced and complex situations to sound bites in the name of simplicity... The minimum expression should be "if you can't be meaningfully different (from your competitor) you should be cheaper (than your competitor)" So a differentiation based on lower price is valid, but if someone else is doing the same, it you would need to be meaningfully cheaper... And if that's all you've got, the spiral of price cutting will drive your prices down... So your business model better be cost competitive / advantageous (which is how Lidl/Aldi succeed vs the traditional retail models)
Director Customer & Market Insight bij Air France-KLM
1 年What if you replace ‘price’ with ‘margin’ (or price premium on top of cost base), then the statement maybe *does* apply also to low cost differentiation. Or not?
Oprichter van Neerlandshoop
1 年Would you say "the more differentiated a brand is the smaller the group of people that potentially would buy it" + "the smaller that group of potential customers the less (room for) growth" ?