Question

How do you use cost structure to differentiate products? Do you think product differentiation is a successful growth strategy? Why or why not?

Answer 1

Product differentiation is highlighting the differences between the competing similar products being sold in the market--on the basis of more or less features, quality,physical structure such as color & size or such other characteristics.

Differentiating products on the basis of cost structure means, incurring or doing away with some costs to add   really different features or to delete some unwanted features ---in one's product compared to a competitor's product ,selling almost a similar product.

For example, a wet grinder manufacturer decides to do away with the coconut -scrapping device , in his version of the product & sells at a much lower price compared to his competitor---on the premise that mostly people do not like to use a wet-grinder for a simple task like coconut-scrapping , & feel they pay unnecessarily a higher cost, for a service they are most likely , not to use.

Whereas,

the competitor argues that he is offering additional features , at only a little-extra price, which may cost even more , if installed later.

Thus more or less features offered with the product necessitates change in the cost structure of the product that explains the differentiation.

Yes.

Product differentiation is certainly a successful growth strategy,

as it helps to target a particular section of buyers, who may or may not want certain additional features in their purchases.

the buyers get a knowledge about the product and can choose between cost savings and additional features, from among competing products.

customers so obtained, create brand loyalty to this product,which helps in the growth of customer-base, by their word-of mouth.