A broad differentiation strategy improves profitability when
A) it is focused on product innovation.
B) differentiating enhances product performance.
C) the differentiating features appeal to sophisticated and prestigious buyers.
D) the extra 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 only improve profitability if the extra price charged for the product exceeds the added costs of achieving differentiation. This is because differentiation often involves investing in research and development, marketing, and other activities that increase costs. To be profitable, the differentiator must be able to charge a higher price for the differentiated product that more than compensates for these added costs.

A Broad Differentiation Strategy Improves Profitability When