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Establishing a Reputation

Another way that you can capture the returns to introducing new products and services is by creating a reputation for providing customers with the best products and services. When you create a positive brand name, you are able to generate perceptions in the minds of customers that your product or service is better than those offered by competitors, thereby mitigating the tendency for customers to shift to competitors’ products or services even if customers can obtain those products or services at a lower price.

The stronger the perception that other products or services are not worthy substitutes you create in the minds of customers, the more you can capture the returns to introducing new products or services. The stronger the perception, the harder it will be for imitators to attract customers away from you. For example, suppose you developed a new, more energy efficient steam boiler. Other companies may also be able to develop energy-efficient steam boilers. However, if you can convince people that your company is better than competitors at providing those boilers, then the customers will not switch to other providers of boilers, even if the other parties offer their boilers at a lower price.


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