Building and Sustaining a Product Differentiation Advantage Through a Community-Focused Strategy

An important reason people join communities is to satisfy their identity needs. Firms might exploit this societal tendency to gain competitive advantages and thus stronger economic profits than rivals. By reviewing the strategic approach adopted by Kiehl's, a U.S. cosmetic producer and retailer, this study investigates a potential mechanism by which firms interact with communities to build a product differentiation advantage. Because it adheres to and supports a well-defined set of values, Kiehl's not only achieves community membership and gains legitimacy but also strengthens the sense of identity that the relevant communities provide to members. These investments prompt reciprocal community member behaviors, which the company channels into its customer knowledge development process. Finally, this study describes how firm–community interactions protect the firm's differentiation advantage by turning its products into symbols of the communities to which Kiehl's customers belong.