Your differentiation strategy is the way in which you make your firm stand out from otherwise similar competitors in the marketplace. Usually, it involves highlighting a meaningful difference between you and your competitors. And that difference must be valued by your potential clients.
What Is Differentiation Strategy In Marketing?
Differentiation is an important characteristic of Marketing. It’s characterized by identifying and offering something that’s not available from competitors. This approach reflects the fact that in your industry, there’s likely to be a number of really good, but similar firms that consumers value. You differentiation approach is designed to push you ahead of these comparable rivals.
The Differentiation Strategy for Marketing helps you discern a relative advantage a difference that truly matters to your target market. This will help you to identify the reasons why your prospects will not want to go with competitors. Keep in mind that differentiation is mostly a relative condition. You’re not saying that you have something that’s better for all prospects. You’re merely saying that your product or offering is superior to other solutions in the marketplace.
In contrast, a differentiation strategy would not be useful when you’re entering a business where you’re the “least awful” solution. E.g. “We’re the cheapest option, so choose us!”
In This Guide, You Learn:
How And When You Should Differentiate
Differentiation means explaining why you offer something better than alternatives. In this practice, you’re focused on why you’re different, as opposed to what you offer.
I strongly emphasize that your differentiation needs to be meaningful to your prospects. Today, many firms are doing a good job of offering something that’s similar to their rivals but try to attract prospects by emphasizing trivial differences. You may believe that businesses are differentiated, but your potential clients may not see it that way.
Does a BMW and an Acura really offer enough differences to allow each to thrive? Well, the look and feel of the car bodies is somewhat different, but perhaps the real difference is that Acura hasn’t spent as much money on its brand image, and as such, it’s viewed as an inferior product.
The right differentiation strategy will likely be a combination of being distinctive along a number of dimensions. You might be offering products that really are fundamentally different in meaningful ways. Or if the products are similar, you might have an approach to the business (at least as perceived by clients) that’s significantly different than that of your competition.
How To Know Whether You Should Consider A Differentiation Strategy In Marketing?
If you’re in a market place where customers have a lot of choices, a differentiation strategy is particularly helpful. In addition, a differentiation strategy is especially applicable when:
- You’re in an established marketplace where you face superior competitors.
- Your product or service is complex.
- Your products or services are innovative.
What The Differentiation Strategy Involves
I like to tell my clients that a successful differentiation strategy means making their firm stand out from the competition in a meaningful way. Here, differentiation means developing a strong set of unique selling propositions, which will help you address the (often unspoken) needs of your customers.
Start With Reference Points
When all the firms in your market are similar, you’ll likely drive away prospects by trying to persuade them to “buy.” Rather, you should be making them aware of the complex and multi-dimensional nature of the product or service that you’re selling.
A person’s reference points are his or her points of view about pricing, perceived value, benefits, service, and other important issues in purchasing. When you’re successful in differentiating yourself from the competition, prospects will say to one another something like: “Let’s go to Gina’s Catering. We know Gina is going to create a wonderful meal for us, and her price will be reasonable.” A good question then is: Where do these reference points come from? They can come from either the person or from others.
If it’s the person, then your task is simple (but not easy). You need to look at how you can make changes in the way your product or service is perceived. This will be discussed in more detail in a future lesson.
If the reference points are from others, then you first need to ask yourself: “Whose reference points are they?” If the reference points are from close friends, you’ll be significantly more successful if you can get them to recommend you. You may be able to do this by catering a party at their home. If the reference points are from acquaintances, you may want to talk with them about how you might serve them better.
The important point is that you need to get your product or service positioned better in the minds of your prospects.
Develop A Big Picture
Most products or services involve a number of different components that are important for decision making. If you are offering an automobile, for example, your buyer will be paying attention to the exterior styling, paint, accessories, engine, suspension system, ride, safety features, price, and warranty.
Before you undertake a differentiation campaign, you should make sure you understand the big picture of what you’re actually selling. You don’t want to try to sell something that people don’t see as “defining the company.” If you are, for example, a furnace repair service, you’re not a “home heating specialist.” If you’re an exceptional “home heating specialist,” then you’re probably selling products that are also available from your competitors, but you emphasize your expertise in providing each client with a unique solution.
Pay Attention To The Emotional Connection
This is especially important if buyers perceive your offering as purely functional (i.e. as allowing for achievement of a specific task). Your differentiation strategy should emphasize the emotional aspects of your offering. This approach goes beyond product function and focuses on what makes it sufficiently different to attract and retain buyers.
For example, you could say, “At the Jack Bumpa Law Firm, we routinely have in-depth discussions with our clients about how we can perform the work in ways that are most satisfying to them. There is a section on how we do this on our website.”
Talk About Your Unique Culture
If culture is central to your differentiation approach, you should be sure that your approach to business culture is distinctive. This approach is about how you treat people, and be sure to emphasize the value of your approach throughout your differentiation strategy.
Highlight Service Differences
If your service is primarily about helping others or solving problems, then you should be sure you emphasize this. Your differentiation strategy should include making sure that your clients can perceive how well you understand the service issue.
If you’ve been through the hard times, you know that the best service approach is one that emphasizes the cultural dimensions of the service. Your differentiation strategy should emphasize:
- The personal quality of the service experience.
- Making sure that the buyer can perceive this personal effort.
- The way in which the service process is organized to emphasize the personal aspect.
- Clear statements of how the service is made available to all clients.
Focusing On Intangibles
If you have a distinctive approach to service, you should be sure to articulate it in any differentiation strategy. There is no substitute for being the best you can possibly be when you treat your clients with respect, understanding, and friendliness.
If you can do this, you’ll find that you can make a choice among industries when you do the analysis that’s necessary to arrive at a differentiation strategy. For example, you may decide that your customers are the most resonant when you give them what they need. That is, you might decide that you should focus on what your customers need in order to be successful at what they are doing or what they need to improve their situation.
If you decide that’s what you want to do, you could make a significant choice. Consider a family with a son in college. The family might have a choice between private or public higher education opportunities.
Focusing on what its customers need to be successful might allow you to enter both markets without harming your differentiation strategy.
Once you’ve developed a differentiation strategy, you’ll need to communicate it to the:
- Market place (through advertising)
- Buyer (by developing and communicating value propositions)
These communications should be done in a way that announces you to the market place, evokes an emotional response, helps buyers to make a decision, and creates a technology that allows you to effectively execute your strategy.
A differentiation strategy helps you to develop your unique value and capture more business. Although a differentiation strategy does not guarantee success in the marketplace, it does give you more of a chance to succeed. Differentiation strategies can also be used to identify and keep the customers you already have.