Question

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.

Answer 1

A broad differentiation strategy improves profitability when it enhances product performance and appeal, targets prestigious buyers, and ensures the price premium exceeds differentiation costs.

Step-by-step explanation:

A broad differentiation strategy improves profitability when:

• It enhances product performance and quality, which can lead to greater customer satisfaction and brand loyalty.
• The differentiating features appeal to sophisticated and prestigious buyers, who are often willing to pay a premium for products that reflect a certain status.
• The higher price the product commands exceeds the added costs of achieving the differentiation, ensuring that additional revenues surpass the costs associated with making the product unique.

Differentiation through product innovation, exemplary quality, and appeal to prestigious buyers can markedly increase a company's profitability, provided that the price premium is greater than the differentiation costs. This aligns with the concept of differentiated products, which are distinctive in physical aspects, location, intangible elements, or perceptions.