If a firm has a successful differentiation strategy, it is necessary to attain parity on cost.

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Differentiation provides protection against rivalry since brand loyalty lowers customer sensitivity to price and raises customer switching costs. By increasing company margins, differentiation also avoids the need for a low-cost position. Higher entry barriers result because of customer loyalty and the company's ability to provide uniqueness in its products or services. Differentiation also provides higher margins that enable a firm to deal with supplier power. And it reduces buyer power, because buyers lack comparable alternatives and are therefore less price-sensitive. Supplier power is also decreased because there is a certain amount of prestige associated with being the supplier to a producer of highly differentiated products and services. Last, differentiation enhances customer loyalty, thus reducing the threat from substitutes.

If a Firm Has a Successful Differentiation Strategy, It Is