A broad differentiation strategy improves profitability when
A)it is focused on product innovation.
B)differentiating enhances product performance and quality.
C)the differentiating features appeal to sophisticated and prestigious buyers.
D)the higher price the product commands exceeds the added costs of achieving the differentiation.
E)the differentiator charges a price that is only fractionally higher than the industry's low-cost provider.

Question

Quizplus · Accepted Answer

A broad differentiation strategy can be profitable when the higher price that the differentiated product commands exceeds the added costs of achieving the differentiation. In this way, customers are willing to pay more for the added value provided by the differentiation, leading to higher profits for the company. Choices A, B, and C are all potential ways that a company can differentiate their product, but they do not necessarily guarantee profitability. Choice E suggests a "low-cost differentiation" approach which is contradictory, as differentiation usually implies higher costs.

A Broad Differentiation Strategy Improves Profitability When