Differentiation strategy definition

Differentiation strategy is one of the most important marketing strategy in today’s business environment. With so many brands and so many varieties of products and so much advertising noise, it becomes very difficult but ultimately very necessary to differentiate your brand from competition. Thus, Differentiation strategy is being used by all top companies for their products. There are various ways to differentiate your product via using a differentiation strategy .

1) Innovation / Invention –

The best way to implement differentiation strategy is to invent or innovate. By innovating or inventing, you become the market leader because your product is the first entrant in the market. Inventions are of course difficult and require regular R&D expenditure. But innovations are more practical and are a Differentiation strategy used by technological companies like Apple and Google.

2) Product-level differentiation strategy –

Observed in many industries, Differentiation strategy can be executed at product level too which is known as Product differentiation. Taking an example of the tourism industry, tour packages of all companies are different and the tour package might have its own differentiating factors. Some might be giving international tours whereas others will be giving national and regional tours only. Thus, by incorporating product differentiation strategy at product level, the brands can use differentiation strategy themselves from competitors in the eyes of the customer.

3) Price differentiation strategy 

The most used form of differentiation strategy is price differentiation. In the above example of tour packages, some brands might give the luxury package whereas other brands might give a cheap and affordable pricing. Mobile handset companies like Samsung and apple target the cream segment whereas companies like Micromax and Xolo target the price sensitive segment. Price segmentation is the biggest Differentiation weapon in the hands of marketers.

4) Branding 

Your promotion mix and the marketing communications of the company play a crucial role in the differentiation strategy of your product. Companies like Pepsi and Coke rely heavily on their branding efforts to convert the customer to their products. Thus, youngsters will like pepsi, young adults will like Thums up, families will like Fanta, and Coke can be an all time favorite for everyone. Your promotion mix helps you target the correct segment and hence plays a crucial role in differentiation strategy.

5) Packaging 

If you go to any publications and ask them what are the critical factors in selling a book, the publication agency will say that, after the story of the book, the top cover of the book plays a critical role in the success of the book. In fact, many a times, customers might buy a book based on the top cover. Thus, packaging is important. The same can be seen when you enter a mall and you have 100’s of shelves with different types of cereals, soaps, shampoos, detergents etc. At such a time, the color, the packaging, the taglines, the ease of handling can play an important role in converting the customer to your brand. The tetrapack introduced by Frooti in the Indian market was a wonderful example of Packaging playing a role in differentiation strategy.

6) Service pre sale and post sale 

Word of mouth marketing is another product differentiator and all brands targeting a niche audience know the importance of word of mouth marketing. And how does word of mouth marketing happen? Through very good pre and post sales service. Ever heard a friend say that not only does the restaurant serve good food, but the service and the ambiance are awesome as well? Thats the service i am talking of. If your service is beyond customers expectation, than that can be a big boost to your differentiation strategy.

7) Point of customer interaction 

There are Sec A, B and C segment customers. You have to ensure that you take care of all kinds of customers when they interact with your company. For this, you have to take care of point of interactions and ensure that the customer has a good experience whenever he interacts with the company. In fact, banks and retail showrooms regularly have audits to ensure that the front end staff is polite and helpful to customers because this can be a major point for differentiation. A service company, which does not have good interactions with the customer will always suffer in its profits and operations.

8) User convenience 

The banking industry shows us an example of how User convenience can help you in your differentiation strategy. The banks differentiate themselves with the type of net banking services they offer as well as the number of ATM’s that they have in your vicinity. This is an excellent example of differentiation through user convenience. If you are taking care of user convenience, the customer will always come back to you. This is the reason why, even though there are so many big retail outlets in the market, the smaller shops still run well. This is because they give personalized service to a handful of customers and the customers find it convenience to shop at the local retail store.

9) Offer variety of products 

Another way to implement differentiation strategy is to attack the psychology of the customers. Many a customer will tell you that they picked a brand just because the brand had more variety in the number of products it offered. A customer, during prospecting, likes to have more variety so that he finds the right product and can pick that product for himself. Thus, the more variety of products you offer, the more chances you have of getting a higher positioning in the mind of the customer and therefore, differentiating yourself from competition. This is a high investment strategy, because you need to invest in a product line, but it is useful and profitable in the long run.

Thus, there are many ways for implementing a differentiation strategy. What the company has to realise is that it cannot sit back and enjoy the customers loyalty today. In this saturated business environment, each and every company has to take steps to differentiate itself from competition and ensure that it has a high positioning in the customers mind. An example of this is websites and google. If a website is not in the top 10 pages of google, than it is likely to be ignored by 50-60% of the searchers on google. Thus, by improving your website and your content, you can reach the top 10 on google and differentiate your website from others.

Can you suggest any more tactics or examples of differentiation strategy?

• Cost leadership
• Strategic Planning

Here is a video by Marketing91 on the Differentiation strategy.