Question

When products are weakly differentiated, should a firm pursue cost leadership or benefit leadership? Briefly explain/justify your answer.

Answer 1

Cost leadership is a type of marketing strategy which is focussed on directing all the resources on providing the goods and services to the consumers at the lowest cost possible. It doesn't mean to provide cheaper goods and services even when its costs of production is high or providing inferior quality products at a cheaper rate. It simply means that the management is constantly able to reduce its cost and is able to remain competitive in producing its entire range of products, that too of acceptable quality. This strategy could be adopted in the case where products are weakly differentiated and where there is little scope of producing highly differentiated products. Examples of this kind include Amazon, Big bazar etc.

Benefit leadership, on the other hand is a strategy which aims at providing superior, unique and/or different benefits than other providers. In this way, the products become highly differentiated and the providers are in a position to justify charging higher prices to its consumers in return of superior quality/service.