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The Role of differentiation in markets driven by advertising (RV of 2002/86/MKT)

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Firms put enormous intellectual and financial resources into creating differentiated products or services for their consumers. In today's business theology, the creation of a differentiated offering is perceived to be a cornerstone of a successful sustainable business. However, in many situations, differentiation may not be a profitable strategy. The objective of this article is thus, to spell out the conditions under which it is profitable to differentiate and those where it is not. The theories that support the value of differentiation are all based on the assumption that consumers have automatic access to information on the best alternatives in a category. The reality of most categories is that many consumers do not have automatic access to this information. Consumers learn about alternatives from advertising and many consumers do not see advertising for all relevant alternatives. As a result, a significant fraction of consumers make decisions with limited information about the available alternatives. The article argues that the value of creating differentiated products is ambiguous when the awareness of products and their characteristics is the key determinant of consumer behaviour.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp2002/2002-120.pdf

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Copyright INSEAD. All rights reserved