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Community-based strategies in action: building and sustaining a product differentiation advantage

  • Andrea Fosfuri

    ()

  • Marco S. Giarratana

    ()

  • Esther Roca

    ()

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    An important reason why individuals join groups or communities is to satisfy their needs for identity. Firms might exploit this societal tendency to gain a competitive advantage. Using the strategic approach adopted by Kiehl’s, a U.S. cosmetic producer and retailer, as a source of inspiration and illustration, this paper develops a novel theoretical framework to investigate how firms interact with communities to access privileged customers’ information, from which they can build a product differentiation advantage. We argue that by adhering and supporting a well-defined set of values, Kiehl’s both achieves community membership and strengthens the sense of identity that its target communities provide to their members. These investments prompt reciprocal community member behaviors, which the company channels into its customer knowledge development process. Finally, this article describes how firm–community interactions can protect the differentiation advantage by turning products into symbols of the communities to which its customers belong.

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    File URL: http://e-archivo.uc3m.es/bitstream/10016/9311/1/indemwp10_01.pdf
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    Paper provided by Universidad Carlos III, Instituto sobre Desarrollo Empresarial (INDEM) in its series Business Economics Working Papers with number id-10-01.

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    Date of creation: Sep 2010
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    Handle: RePEc:cte:idrepe:id-10-01
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    1. Sofia Berto Villas-Boas, 2009. "An empirical investigation of the welfare effects of banning wholesale price discrimination," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 20-46.
    2. Ger, Guliz & Belk, Russell W., 1996. "Cross-cultural differences in materialism," Journal of Economic Psychology, Elsevier, vol. 17(1), pages 55-77, February.
    3. Anindya Ghose & Vidyanand Choudhary & Tridas Mukhopadhyay & Uday Rajan, 2002. "Personalized Pricing and Quality Differentiation on the Internet," Review of Marketing Science Working Papers 2-1-1005, Berkeley Electronic Press.
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    6. Muniz, Albert M, Jr & O'Guinn, Thomas C, 2001. " Brand Community," Journal of Consumer Research, University of Chicago Press, vol. 27(4), pages 412-32, March.
    7. Vidyanand Choudhary & Anindya Ghose & Tridas Mukhopadhyay & Uday Rajan, 2005. "Personalized Pricing and Quality Differentiation," Management Science, INFORMS, vol. 51(7), pages 1120-1130, July.
    8. Shantanu Bhattacharya & V. Krishnan & Vijay Mahajan, 1998. "Managing New Product Definition in Highly Dynamic Environments," Management Science, INFORMS, vol. 44(11-Part-2), pages S50-S64, November.
    9. Sandra K Smith Speck & Abhijit Roy, 2008. "The interrelationships between television viewing, values and perceived well-being: A global perspective," Journal of International Business Studies, Palgrave Macmillan, vol. 39(7), pages 1197-1219, October.
    10. Eric von Hippel, 1998. "Economics of Product Development by Users: The Impact of "Sticky" Local Information," Management Science, INFORMS, vol. 44(5), pages 629-644, May.
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