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CMA Final · Entrepreneurship and Startup · Value Addition

A Chennai startup offers the same basic water purifier as its rivals but adds a free annual service plan, an app that tracks filter life, and a quick-response helpline, charging 10% more. This strategy of adding value is best described as:

This is differentiation through an augmented product. The core purifier is the same, but the service plan, filter-tracking app and helpline give customers extra benefits that justify a 10% price premium. It is not cost leadership, penetration pricing or backward integration.

  1. Adifferentiation through augmented product and service featuresCorrect
  2. Bcost leadership through lower input prices
  3. Cpenetration pricing to gain share
  4. Dbackward integration into component manufacture

Explanation

Extra services and digital features layered on a core product create an augmented offering that justifies a premium, which is differentiation. Cost leadership and penetration pricing would involve lower prices, and no component manufacture is mentioned.

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