There are many options for differentiating a brand, depending on the company’s internal capabilities and competitive environment. In this post, I will talk about how to gain a competitive advantage through product differentiation.
Differentiation Strategy: 3 Important Questions
Before developing the differentiation strategy marketers should have the answer to these questions:
• Is my brand the first in the category to claim this differentiating idea? If one of your competitors already owns that positioning your best bet is to explore a different option.
• Will my company be able and willing to deliver on that competitive advantage over a long period? Brand building takes a long time, consistency, and perseverance. If management is not willing to allocate the necessary resources (which vary depending on the industry and level of competition) then your strategy will die in its infant stages.
• Does my differentiation idea translate into a meaningful benefit for the consumer? If the consumer is not willing to pay for it then you have to start from scratch.
What Is Product-Based Differentiation
This differentiation strategy involves using the characteristics of the product you market to differentiate from your competitors.
Every brand is built on a product (I include services here as well). As a result, especially in the early stages of the brand-building process where not enough emotional connections have been built, product-based positioning might be one of the very few options available.
Is Differentiating On Products The Right Strategy For My Brand?
Companies most successful in using this strategy are those who focus on product innovation. They invest important resources in researching, developing, and introducing new products and improving the existing ones.
How Do I Differentiate On Product
There are many benefits that consumers value and look for when purchasing a product. Below are the most common ways to create differentiation:
Product features– a product that solves problems faster, or solves the same problem cheaper is worth paying more for. Hyundai has positioned itself as a car company that offers “more vehicles” for the money. The Brand Manager needs to establish what the cost/benefit ratio is before deciding to add a product feature and use it as a differentiation element. If the overall cost is higher than the premium that can be charged for it this strategy is not worth pursuing.
The manufacturing process- how the product is made can be a great way to set your brand apart from the competition. In today’s economy where most products have become commodities, the “secret ingredient” or “proprietary technology” can make the difference. Lululemon®, a well-known Canadian manufacturer of yoga-inspired apparel, has built its success on the proprietary luon®, a fabric that provides shape retention and great stretching capabilities. The brand has become synonymous with yoga apparel and dominates the segment against giants such as Nike and Adidas.
Performance– is another great product attribute that can be used to separate your brand from the competition. BMW makes great use of this concept by positioning their cars as “The ultimate driving machine.” Cervelo’s dedication to designing and building aerodynamic bikes is what helped the brand carve a distinctive niche in the super-competitive race bike segment dominated by much bigger players such as Trek, Specialized, and Giant. Their slogan, “Speed. Engineered.” is a great reflection of their philosophy.
Design– Attractive, unique product design is a very effective way to differentiate. Apple is constantly pursuing this strategy which reflects in the entire assortment, from iPods to MacBooks.
Italian companies frequently pursue this strategy, be it in cars (Ferrari), clothes (Gucci), or bicycles (Pinarello, Cogliano). Nordic European countries are famous around the world for their design that combines simplicity, functionality, and practicality.
These are just a few examples of how product-based differentiation can be achieved. There are an unlimited number of options that a company can pursue, depending on its capabilities.
Is “Product Quality” A Good Way To Differentiate?
Positioning on product quality is mostly suitable for brands that have a long history of delivering reliable products, accompanied by credentials to prove it. Industry awards and independent test results are great tools to support this type of positioning.
Challenges of Product-Based Differentiation
The “me-too” danger. Product features and characteristics can be easily copied. Your company needs to be one step ahead of the curve and invest in improving and perfecting the product, otherwise, it will quickly become obsolete.
The “lower price” danger. Globalization brings a lot of benefits but also many challenges. There is always the threat that a competitor might launch a product with the same features, at a lower price.
The “demanding consumer” danger. Products have shorter life cycles as consumers gravitate towards the” newest stuff”. To remain competitive, you need to keep up with the latest trends and technologies, or your target audience will switch to competitive offerings.
In my next posts, I will explore other ways in which a brand can gain a competitive advantage. I invite you to subscribe to my blog by e-mail to make sure you receive all the articles in this series.
Gugu Motsoeneng 