PRODUCT DIFFERENTIATION STRATEGIES

Once a company has decided which market segments to enter, it must decide on its differentiation and
positioning strategy. Differentiation involves actually differentiating the company’s market offering to
create superior customer value.

Effective positioning begins with differentiation. The company first identifies possible customer value
differences that provide competitive advantages on which to build the position.

A product can be differentiated on the following basis:

 Product Differentiation:
Brands can be differentiated on features, performance, style or design.

 Service Differentiation:
Some companies gain services differentiation through speedy, convenient, or careful delivery. Others
differentiate based on high-quality customer care.

 Channel Differentiation:
Firms that practice channel differentiation gain competitive advantage through the way they design
their channel’s coverage and performance.

 People Differentiation:
Companies can also gain a strong competitive advantage through people differentiation - hiring and
training better people than their competitors do. People differentiation requires that a company select
its customer-contact people carefully and train them well.

 Image Differentiation:
Even when competing offers look the same, buyers may perceive a difference based on company or
brand image differentiation. A brand image should convey a product’s distinctive benefits and
positioning. Developing a strong and distinctive image calls for creativity and years of hard work.

If a company discovers several potential differentiations that provide competitive advantages, it must next
choose the ones on which it will build its positioning strategy.

Many companies aggressively promote only one benefit to the target market. They develop a Unique
Selling Proposition (USP) and stick to it by touting themselves “number one” on that.

Some companies position themselves on more than one differentiator. This is necessary if two or more
firms are claiming to be best on the same attribute. Today, in a time when the mass market is fragmenting
into many small segments, brands are trying to broaden their positioning strategies to appeal to more
segments. Many buyers want these multiple benefits.