Benefits
1. Protection against entry due to intangible resources such as a reputation for innovation, quality, or customer service
2. Protection against increase in input prices, which can be passed on to customers
3. Protection against decrease in sales process, because well differentiated products or services are not perfect substitutes
4. Protection against substitute products due to differential appeal
5. Protection against competitors if product or service has enough differential appeal to command premium price
Risks
Erosion of margins
Replacement
Erosion of margins
Erosion of margins
Replacement, especially when faced with innovation
Focus of competition shifts to price
Increasing differentiation of product features that do not create value but raise costs
Increasing differentiation to raise costs above acceptable threshold