Question

Regarding Product Differentiation:

1.Define product differentiation.

• 2.Explain horizontal vs. vertical product differentiation.

• 3.How can advertising act as a barrier to entry?.

• 4.Explain search vs. experience goods in advertising. .

• 5.Define advertising intensity.

• 6.Know the Dorfman-Steiner condition for an optimal price-advertising strategy, and be able to apply given values for the formula.

Answer 1

Answer:- Product differentiation can be defined as those marketing activities which are directed to have some differences in the products as against the products of competitors. This can be achieved by changing some appearance, physical attributes, traits, technology, colour, services offered and so on which is different from the offerings of the competitors.

Answer:-

Horizontal Product Differentiation:- In this, the products which are being offered o the customers are different but due to the similarity in prices some customers prefer a certain brand while other customers will select another competing brand mainly due to the choice of brand.

Example:- Coca-Cola and Pepsi

Vertical Product Differentiation:- In this, the products are different from each other and if the price of the product is same, then customers will prefer to buy one product than others. There will be a difference in the product quality.

Example:- BMW and Ford

Answer:- Advertising can be seen as a mode of barrier entry as advertising plays a very significant role in creating the brand image of a certain brand. This will have a decisive role in the total market share of the company. At present, advertising is the backbone of any strong brand. In fact, no brand can sustain in the market without advertising as in the absence of the advertising, the image and recall value of the brand will fade away with the time and it will be replaced by that brand which is advertising more. Advertising requires a lot of funds and thus the companies can use it as a mode of entry barrier as the firms which have good financial status can afford to advertise their products intensively and thus they can force the other upcoming brands either to go out of the market or not to enter in the market.

Answer:- Search Goods:- Search goods can be defined as those products which can be easily evaluated in terms of their traits and characteristics before buying the product. These goods are more subjected to the substitution and price competition

Experience Goods:- Experience goods can be defined as those products which cannot be evaluated easily in terms of their traits, price, quality and characteristics before buying the product but when the product is consumed, these traits of the product can be estimated.