Meaningless and ambiguous differentiation: considering their relative value using random utility theory and signalling theory

Traditional product differentiation occurs when consumers are offered something that isrelevant and of perceived value. In contrast, some empirical evidence suggests success isachievable by offering a feature that has ambiguous value or revealed to be of meaninglessvalue. Previous assessments of such strategies only consider the overall rating of a singledifferentiated product. However, we argue that feature differentiation strategies should beassessed in environments where the relative value of the feature is considered and comparedto trade-offs made on competing features (e.g., price). A theoretical model and experimentalapproach based on random utility theory and signalling theory is offered. We findmeaningless differentiation is meaningless; however, ambiguous differentiation may besuccessful if contextual signals (e.g., premium pricing; uniqueness) are diagnostic andconsistent in suggesting its value.