What makes your offering different from the rest? What can you do to stand out from the pack? This article deals with the concept of product differentiation. It's a topic relevant to all businesses and a core marketing concept.
Depending on the industry and product offering, varying degrees of differentiation are possible. At one extreme, products such as cars, video games, and furniture, offer a high potential for differentiation. On the other extreme, steel, aspirin and rubbing alcohol offer much a much lower potential for differentiation. Nevertheless at least some meaningful differentiation is possible with virtually all offerings. Here we outline some of the areas products and services can be differentiated. Consider the areas that make sense for your offering. We'll also discuss which differences, and how many differences should be promoted.
Physical Product Differentiation
- Features: A product can be offered with characteristics that add to its primary functionality. Innovating by adding new features that the competition doesn't offer is often an excellent way to compete.
- Style: Buyers are usually willing to pay more for products that have an attractive look or feel. Apple is able to charge more for its computers in part because of Apple's focus on a slick user interface and product appearance.
- Performance and Conformance Quality: Most products and services can be provided with varying degrees of quality. Customers are usually willing to pay more for higher quality products - quality in terms of performance levels as well as the degree to which all units produced are identical (conformance). There is usually a positive correlation between product quality and profitability – as quality goes up, so does profitability because higher prices can be charged. The increased costs associated with quality are often less than the extra revenue generated by the price increases. Firms with higher quality products tend to command higher levels of customer loyalty and benefit from promotion through word of mouth. This doesn't mean that you should go for the maximum possible quality. At a certain point it becomes prohibitively expensive to increase quality further.
- Physical Form: The shape, size, color and other physical product attributes can usually be differentiated. Wood pencils are essentially a commodity but even they can be differentiated - by color, eraser type, graphite mixture (the “lead”) for example.
- Reliability: Customers tend to prefer products that are less likely to fail or malfunction
- Repair-ability: Customers prefer products that are easy to repair.
- Durability: Customers usually prefer products offerings that last longer and can endure more “use and abuse”.
Customer Service Differentiation
- Maintenance and Repair: Offering service programs to help customers keep their products in good working order can be an effective selling point.
- Ordering Ease: Customers generally prefer making orders with ease. This is why many businesses offer telephone and online ordering options.
- Product Delivery: Customers prefer to have their products delivered quickly, accurately and undamaged.
- Installation: Ease of installation is an effective differentiator especially if the product is technological in nature and the customer is not “tech savvy”.
- Customer Training: Some companies train the customer's employees on how to use the product. It's common in the medical industry for vendors to train hospital staff on medical equipment for example.
- Customer Consulting: Some companies add value by offering information and advising services in addition to their primary product offerings.
Personnel, Distribution Channel and Image Differentiation
Personnel: Staff are the front line for businesses. Differentiating through better trained employees can bring about a significant competitive advantage. Better trained people tend to be more competent, credible, reliable and responsive.
- Distribution Channel: Improving the performance of your distribution channel can lead to significant competitive advantages. Part of Walmart's success is due to the quick flow of information between Walmart and its distribution partners. Suppliers know when it's time to ship more product because they are electronically connected to Walmart's inventory systems.
- Image: Companies work hard to attribute specific images to their brands. Apple has successfully branded its computers to have a trendier, “cooler” image than Microsoft Windows. Apple's differentiation efforts have been extremely successful. Many consumers think of a “Mac” as being something other than a PC. “PC” stands for “Personal Computer”, which is exactly what a Mac is! Symbols (like Apple's apple), media (advertisements, brochures etc.) and event sponsorship are all used to build company image.
Which Differences to Promote?
As discussed, product offerings can usually be differentiated along many attributes. Choosing where to focus your differentiation and improvement efforts means considering three main questions:
How important is the attribute in question to customers?
Does the company have sufficient resources to implement the required improvement?
How quickly can the desired improvement be implemented?
As an example, let's say a company knows that customer service is perceived as highly important to customers. If the company is lacking in this area, efforts should be made to improve service. If the company cannot afford to improve service in the short run or if service improvements will take too long to implement, then an alternative product difference should be promoted. If the company already has a strong service performance but customers are unaware, then it's a matter of communicating the difference to the market.
How Many Differences to Promote?
Many marketers believe it's important to choose one main difference and focus promotion efforts on it. The chosen feature should be unique among competitors. Top positioning focus can include “best service”, “best quality”, “most durability”, “most convenient” and so on.
Not everybody agrees that differentiation efforts should focus on only one feature. This is especially true if more than one competitor claims to be the best in a certain area. Some companies successfully differentiate their products on two or three benefits. As a general rule, as the number of benefits promoted increases, the chances of effective differentiation decreases.
The following are several common positioning mistakes:
- Under-positioning: Often, companies find that their target market has only a vague idea about the product offering. This is often a result of promoting benefits that aren't significant or different enough from the competition. The product is seen a “the same thing” as competing offers in the market place.
- Narrow-positioning: Focusing too narrowly on specific product benefits can lead customers to believe the product is less useful than it actually is.
- Confused positioning: Changing the brand's positioning frequently or promoting too many features can lead to confused consumers.
- Doubtful positioning: Just because a claim is made, it doesn't mean customers will believe it. Customers may already preconceptions about a product's performance. Customers often doubt claims that differ greatly from these preconceptions. In other words, avoid trying to pass off a Lada as a Rolls Royce.