Bases of Product Differentiation

Strategic Management

Bases of Product Differentiation

There are a total of 12 bases of product differentiation, but it is important to view them in groupings to best understand their utility. The first four try to create the perception that a firm’s products/services are unusually valuable, thus increasing the willingness to pay and by consequence, value. Product features, product complexity, timing of product introduction, and location all play in to this, and are in fact, the first four bases. Let’s use the example of an iPhone to illustrate these points.

Product Features- The iphone5 boasts a retina display, which yields a higher definition than most HDTV’s are able to put forth. Additionally it has a new chip that processes data far faster than its predecessors, allowing it to seamlessly stream video and television.

Product Complexity-Clearly, this is a complex device. Apple tries to convince the consumer that they have taken a complicated machine and made it user friendly and of a flawless functionality. They actually have done this, for the most part.

Timing-The iphone5 or any iPhone usually has the first mover advantage. Apple innovates things that may exist already, but by changing the whole design and function, have an entirely different experience for the user. For instance, mp3 players were around before the iPod, but they were not really great when it came to storage, simplicity, and functionality in a moving environment. So Apple saw this, gave us an iPod, originally with two buttons (wheel and center), and added flash memory so the songs wouldn’t skip while they were being accessed by the hard drive. At that time, no one had seen anything like it.

Location-Location refers more to the experience of where you receive the good, such as Disneyworld. I think in Apple’s case this could be described as the Apple store. They are designed to be athestically pleasing, showcase all their products, and have helpful employees to answer questions. It’s almost like a constant launch party.

The next three bases cover the way the firm tries to create value through its relationship with its customers.

Product Customization- Customers are given the option as to what color they’d like their new iPhone, as well as the

...