Strategic Planning: How Product Differentiation Strategy Depends on Market Type
What is it that makes your product unique? How to make it visible and position it well on the market? How to reach a wider spectrum of consumers as possible?
These are just some of the numerous questions every serious entrepreneur should have in mind when considering any start-up.
It’s all a matter of smart and well-organized strategic planning, where one should think of as many aspects as possible so to make the whole project successful.
Here we shall discuss how product differentiation strategy depends on the market type.
We shall try to give you a thorough insight as possible so that you could understand each of the segments well.
PRODUCT DIFFERENTIATION DEFINITION AND TYPES
Before we start explaining one by one of many aspects regarding the subject, let us start with the definition.
Differentiation is the marketing process of differentiating any type of offering from similar ones in the market, with the goal to make it as appealing as possible to its target audience.
Offerings include both products and services.
To put it simply, your target group needs to understand clearly what is it that makes your product unique and different from the competition.
You need to point out all the benefits that your product or service has compared to similar ones.
What comes as a logical conclusion is that all this has to do with standing out from the crowd.
Things are rather simple for those who are establishing something that is new and innovative on the market as they do not have immediate competition from the very beginning.
Still, that doesn’t mean that they have no worries at all.
They have to think about several steps in advance.
This means they need to know how to protect their offering from the impact and maintain the freshness that made the successful and visible in the first place.
When differentiating a product or service, you can use a plethora of factors, which we shall introduce a bit later.
However, there are three main categories regardless of the type of product or offering and those are:
This one is not associated with the quality or the price of the product itself. Here, for the same amount of money you get the same offering.
When making a decision based on this type, it’s usually a matter of personal preference which one to select.
A good example of this type could be making a choice between Coca Cola and Pepsi.
Both of them belong to the same category of drinks, the bottle is more or less similar, as well as price and taste.
Unlike the previous type, here price and quality both play very important roles. If you have two offerings that have similar costs, you would opt for the one that will bring you like more quality as you can get for the money you pay.
Here’s a simple comparison, there are two basic shorts, one generic and one from a top designer.
If they cost the same, which one would you buy? The answer explains the best how this type works.
This one is also known as simple, as it is based on a combination of several factors. People often mix this one with horizontal, but it’s not.
An example of this would be an offering of the same class, similar price but from different manufacturers.
But besides these factors, a consumer usually takes many more to make a decision. That’s what makes it different from the first type.
ADDITIONAL FACTORS FOR PRODUCT DIFFERENTIATION
This list is significantly longer than the previous one as it helps a consumer make a precise decision.
From a buyer’s point of view, each one of us wants to get as much as possible for the money spent.
Some people care about the quality more some less. Some will buy branded items only, while the others won’t care about it at all.
All in all, the main point is that each one of us will take different parameters when deciding what is suitable, be it a service or product.
That’s why all the project-makers need to be aware of all the factors that the target group will take as parameters when choosing between two products or services.
Have you heard of USP?
That’s a unique selling proposition, and that includes absolutely all the segments of your product which result in something that makes it different from the rest.
Here’s the list:
This is more or less a universal factor, regardless of the culture of a country where one lives. People like to get as much as they can for the money they invested.
This factor divides the consumers into two categories- those that opt for premium offerings and the others that pick economical ones.
For example, clothes you can buy in a renowned boutique belongs to the first group, compared to some non-branded which you buy in some ordinary shops.
Origin, material, shape, color, size, ingredients are just some of the sub factors from this group.
Those are the ones that differentiate offerings within the same price range.
Looking from the other side, those help the manufacturers justify the price of their product, particularly if it’s higher.
3. Quality and Performance
Still, those who like to think wider than the average will put this factor in the first place, as it’s indeed significant. No matter what, it’s the quality after all that people remember a certain product for.
Good quality is the main reason some products manage to stand the test of time and remain well-positioned on the market.
Take, for example, some well-known batteries such as Duracell. Compared to some ordinary ones, they normally last ten times longer.
This usually has to do with the previously listed factor, but not necessarily. We all want to get a product with as lower chances of malfunctioning as possible within the given time frame.
This one is mostly related to clothes or shoes, as well as accessories. Branded products usually look good because one or more designers were brainstorming about the ideal looks.
But that certainly isn’t a rule of thumb. You may encounter quite a satisfactory non-branded product, which has a design so good that it can stand right next to those big names.
6. Channels of Distribution
This is a unique path you create how to deliver your product to the ones you previously targeted. Some companies use selective strategy as their own way to position themselves as a reputable brand.
This one is mainly important for the technology industry. If you want to target a wider audience, you will make a simple user-friendly product which the majority of people will be able to use intuitively.
On the other hand, if you want to blow tech geeks’ minds out, you will make something trickier.
That’s because the targeted group will not be so wide.
8. Functionality and Benefits
Try to think of a way to make your product do something that competitors’ offerings cannot, and people will notice you.
People like that all-in-one concept, and as long as that added function won’t ruin your initial idea and concept, go for it.
If you can “solve” several problems with one product, people will find your product to be multi-beneficial and they will opt for it rather than something that gives them less.
Are you, as a manufacturer able to customize the product in a way your competitors cannot? Each and every market has multiple types of consumers, and some are more some less demanding.
The later ones will take thousands of aspects into consideration, and customization is certainly one of them.
You know all those prejudices that people have when they hear that some person is from a certain country? The same goes for products.
But, like with people, there are plenty of exceptions, particularly those that surprise us in a positive way.
Do know that this is not so related to a location where one can buy those products.
Internet shopping puts things in a completely different perspective by making it possible for people to buy whatever they want from all over the globe via the internet.
11. Marketing Efforts
We could freely say that this one could be a complete story for itself, as it is similar to the philosophy.
But, in simplest words possible, you can use multiple tools to advertise your product and help people focus on its good sides and benefits.
There are many different ways to promote your product, using the oldest “word of mouth” technique, up to some contemporary ones, such as the Internet and social networks.
12. After Sale Services and Interaction
This certainly adds value to the products and help consumers make the difference between those who mean business from those who are not so professional.
A brand that sticks to itself should have a dedicated team behind, a group of people who will be available as customer support.
Via mail is the easiest and let’s say basic level.
But, if you really want to show consumers that you are there to answer all their problems, phone service at customers’ disposal 24/7 will make you recognizable.
These factors we listed here are mainly related to products. Services can include several more sub factors, which play an important role when opting for it. Those are:
13. Ease of Ordering
Imagine that you are in a restaurant or you are trying to schedule a message for example. How simple is getting what you want? How many steps does it require?
People prefer when they don’t have to trouble a lot in order to get the desired service. Those are the questions you need to have in mind when offering a service.
14. Delivery Time
Again, if you are in a restaurant, you don’t want to spend an hour waiting for your lunch. Again, be careful with this one.
If a certain service requires more time to be delivered, better inform the customers so that they don’t expect impossible.
If you rush things, you could spoil the quality, and that’s definitely not what you would like, right?
Here we could take giving a private lesson as a good example. Not all the people have the ability to acquire and understand knowledge the same way.
Some need more, some less time. That’s why it’s very important to have a different approach for every student.
It can be a bit challenging if you are working in a group, but it’s possible to find a balance. Like we said many times, it’s all about good strategy.
People usually have more confidence in those with rich experience, and this totally makes sense.
On the other hand, consumers should still be ready to give a chance to the fresh ones in the industry, as they also need to gain that valuable experience.
17. Company-Customer Relationship
The line between being pleasant and friendly in a professional way and between turning that relationship into quite a casual one is quite thin.
It’s desirable to create a small distance but still make people feel relaxed.
This can simultaneously be an advantage but a disadvantage as well, depending on how one uses it.
DIFFERENTIATION AND ITS GOOD SIDES
Putting efforts to be visible in the competitive market, particularly if you offer something that is rather common, can be very challenging.
You need to think more than someone who is trying to position a product or service that is rare.
This is precisely where smart differentiation strategies can help you reach the target audience.
As with any project, there are numerous pros and cons that go along with the implementation.
Let us start with those positive side effects:
1. Digital Means Help You Focus More Precisely
This gives you plenty of space to explore and breathe more life to your project. By making it sound and look more emotional, you add value to it, and that’s what consumers indeed appreciate.
For example, imagine that you are advertising a dog training program that promotes off-leash training and you want to target people with kids.
Naming your program something along the lines “A unique off-leash dog training program that teaches children to become the best dog owners” will definitely be a smart choice and will help you stand from the crowd.
Moreover, your idea will sound more appealing as it targets dog owners with kids, but it actually refers to anyone trying to find good ways to walk with a dog without a leash.
2. Turn Clients Into Fans
Having that special power to hear what people have to say and fulfill those desires and demands they have, certainly makes you more appealing to consumers.
People are thrilled when someone solves any problem instead of them.
If they are satisfied, they will spread the good word at the speed of light.
You have to think of a smart and effective name to attract an audience, but you also need to offer precisely what you are advertising.
Only when this balance is present you stand quite good chances of success.
3. Gives a Variety of Choice
If people have a wide array of offerings to choose between, it’s much better than one unified service or product.
You have the freedom to tailor whatever happens to be the subject of your project to the specific needs of a certain group of people.
Variety of choice consequently gives project-makers plenty of space to position themselves as the market is segmented into tinnier groups.
4. Creative Freedom for Suppliers
Being closely correlated to the previous section, here’s where you can be as creative as possible in finding the way to get to your audience.
There are no specific rules regarding differentiation which dictate if things should look at this or that way, everything is allowed.
Of course, as long as you are using fair means and advertise honestly without representing your offering in the wrong way.
It’s not only about being inventive, but re-inventive as well, as market constantly changes.
DIFFERENTIATION AND ITS BAD SIDES
Almost all the good sides have their “bad” counterpart as they all come with certain limitations.
Well, it mostly depends on the way you see things as none of these is a rule of a thumb.
Here are some of the less positive side effect of differentiation strategy.
1. Too different is not the greatest choice.
Sometimes it happens quite unexpectedly or unintentionally, to be more precise, and sometimes it’s something that supplier was striving to.
Whichever the case is, it’s not good, as it has a certain dose of aggression in it.
You need to make it understandable to the audience, as people often get scared away by too complicated things.
In addition to this, they don’t like offerings that sound too good to be the truth, as there are no adequate proofs to support that.
2. It excludes a certain group of consumers.
Like the previous one, it sometimes comes without the intention, and that’s why suppliers need to be very careful how will they advertise their product. Knowing the niche you are trying to target is very important.
However, if your offering can bring you a wider range of consumers, make it sound that way. The best way to check this out is to test the market and explore the smartest way to advertise.
Of course, it’s not something that a single person can do, sometimes a team of experts is needed to do the research and find the formula for success.
THE IMPORTANCE OF DIFFERENTIATION AND HOW TO GET THE BEST OF IT
There are certainly many positive and negative aspects of this process, but the key is in knowing the smartest way to use it.
It’s one of those things that can become a powerful weapon only if in the right hands.
This era of contemporary digital technologies certainly gives more space than before.
But, this also bears an equal number of advantages and disadvantages.
All in all, there are still predominantly many reasons which favor this strategy.
The more the competitive the market or industry is, the more it motivates the suppliers to do their best to position well.
It’s understanding what people want and giving them that.
Here’s why differentiation plays an important role:
- Make product’s attributes become benefits, if well introduced.
- Help consumers decide what’s precisely for them.
- Gives a consumer valid reason to trust to a certain brand, and repeat the consumption if satisfied.
- Gives pricier brands justification for higher prices.
As we said, it’s definitely something that requires a dedicated team of people, because it can be complicated and simply too much demanding for a single person to deal with it alone.
There are numerous experts in the fields.
Their advice is priceless because they are the ones that have the proper knowledge to make your offering visible on the market and desirable among consumers.
Those experts usually include product and marketing manager, sales expert as well as reliable customer support.
Of course, it doesn’t mean that you need to have a whole team in the fullest from the very first day, but at least one expert would be enough.
As time goes by, you can join more people to the team.
Why are these experts so important?
Because every product and service have multiple layers and each of them can become a valuable differentiation factor.
Many people usually have marketing expert as the first association as he/she definitely plays the most important role, but it’s only one piece of a puzzle.
The more questions you can think of your very own offering, the more experts you need.
But as we said, you don’t need to have all of them at once.
One of the reasons for that is the financier.
Hiring too many people, in the beginning, can be challenging for your budget.
You certainly don’t want to deal with the losses before you even started making some profit.
If you are new to the whole differentiation thing, you may think that it sounds too complicated to deal with it, but don’t let the initial impression fool you.
You can start from the simplest steps and those are:
1. Knowing Your Market
Do research prior to just releasing your offering on the market. You cannot just enthusiastically let the product or service without knowing if people are interested in it or not.
You certainly don’t want it to be the “wrong time, wrong place” situation. This also includes the possible competition.
2. Ask for Expert’s Advice
Once again, it’s almost impossible that an individual is capable of dealing with all the challenges him/herself.
That’s why a professional can help you have a good start by creating a unique strategy and step by step plan for the as optimal possible approach.
These two simple steps are only surface scratchers, but it’s important to make the first step.
That one is usually the hardest, but let’s face it: how would one know if he/she can succeed without even giving it a chance.
Each project bears both positive and negative aspects, and it’s definitely a road full of obstacles. To make it more difficult, there are no rules to follow, not a universal strategy or approach.
But once you find yourself in the “machine” be sure that you will end up with plenty of new and useful experience, no matter what.
As you could see, it all boils down to a smart strategy. In this case, the whole process looks very complex, and it is.
But that surely doesn’t mean it’s overly complicated, it’s just something that requires plenty of planning. But you know what- it pays off!
Once you succeed in positioning your service and products and reach the target group, what you do is maintain that and think of good ways to get more new consumers.
But, that’s a subject of some other article.
Early days for any startup are very important.
As soon as you apply all of the advice we listed here and have a full understanding of how product differentiation strategy depends on the market type you are already on a halfway to success.