Final answer:
Breads & Butters differentiates itself through its unique 'twisted bread' logo, which creates a distinct image and influences customer perceptions, aligning with product differentiation by image.
Step-by-step explanation:
Customers recognize the products of Breads & Butters through the unique "twisted bread" logo that the coffee shop uses. This logo has helped the firm revolutionize its products and create a distinctive image that sets it apart from the competition. Hence, the firm has differentiated itself through its image.
Differentiation can be achieved in various ways, including the physical aspects of the product, location, intangible aspects such as reputation or promises, and perceptions shaped by advertising. In the case of Breads & Butters, the logo is part of the intangible aspects that contribute to the product's differentiation, as it establishes a unique identity and influences customer perceptions. This is a clear case of differentiation by image rather than by the other options listed like people, services, channels, or positioning.