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Price and differentiation strategy - Coggle Diagram
Price and differentiation strategy
Strategic Pricing Process
Step 1: Identify Customer Utility
Ask: Are we offering exceptional utility?
Market and customer needs are constantly changing.
Step 2: Validate Value Creation
If value is validated by customers, a price increase may be justified.
Step 3: Cost Alignment
Ensure costs are covered effectively to avoid losses.
Step 4: Remove Adoption Barriers
Customers may hesitate due to misconceptions or extra effort.
Example: Cotton diapers & bamboo sheet misunderstanding.
Strategic Sequence
Must follow this order:
Utility
Price
Cost
Adoption
Failure in any step means revisiting the value proposition.
Case Study: Motorola Failure
Motorola tried combining phone + radio.
Lacked strong utility due to poor cell signal.
Devices were bulky, poorly received by sales team.
Outcome: Strategic failure due to weak first step (utility).
Customers Want It All
Today’s customers want low price AND high differentiation.
Challenge: Delivering both in a balanced way.
Differentiation Strategy
Differentiation ≠ Less Similar → It means Being Unique.
Combine different value elements into one unique offer.
How to Differentiate
Understand your customer deeply.
Identify unmet needs or pain points.
Explore what current competitors lack (e.g. financing, warranties, delivery).
Match with your own strengths.
Innovate by combining value elements.
Examples of Differentiation
Starbucks:
Went beyond just coffee.
Offered comfortable physical space and quality service.
Achieved impressive first-year sales (6,010).
Sephora:
Offered experiential retail: customers could test products (smell, touch, apply).
Filled a market gap ignored by department stores.
Value Innovation
Innovation ≠ Just new things → Must be valuable.
Customers should be willing to pay for it.
Not all innovation is profitable by default.
Challenges in Innovation:
Customer resistance to change.
Imitation by competitors.
You must make your innovation sustainable.
Protecting Your Value Proposition
Intellectual Property Tools:
Patents
Trademarks
Copyright
Trade secrets
If not protected, followers may take the lead and profit from your innovation.
Example:
In aviation industry (1977), the follower, not the innovator, captured the commercial jet market.