Constantly improve your business plans to make sure you stand out from the crowd
As a customer, have you ever had a need filled that you didn't even realise needed filling? Or maybe in business, you've arrived at an idea that's fresh, innovative, and just begging to be marketed? How do you go about moving forward with that, so it can actually happen?
In a competitive world, where everyone is vying for attention, you need a solid differentiation strategy. Differentiation requires creativity, innovation, and research to understand the needs and preferences of customers.
In this article, you'll discover what a differentiation strategy is, the different types, how to develop it, and its relevance for businesses.
What is a differentiation strategy?
Like a USP (Unique Selling Proposition), a differentiation strategy is a process that organisations adopt to offer customers something unique and distinct regarding their products or services. It helps to set them apart from their competitors. A bit like a first mover advantage, where a company gains a competitive edge over others by launching a product or service first, a differentiation strategy makes a business different by providing something that hasn't been done before. With companies constantly competing for business, it's a massive advantage to have something you can offer that people want and that no one else has.
To achieve this, the business must meticulously analyse its strengths and weaknesses, learn how to adapt, and assess the value of this new product or service to see if it meets the requirements of its chosen demographic.
What are the types of differentiation strategies?
There are two main types of differentiation strategy:
Broad differentiation strategy
This means starting up a new company or brand that's totally different from everything else, with an overall remit to attract lots of different types of consumers to gain a competitive advantage.
Focused differentiation strategy
Having a focused differentiation strategy means providing products or services that have distinct differences from the competition, in order to meet the needs of a narrower market.
How to develop a differentiation strategy that works
To position a business strategically, keep in mind the five Ps - Product, Price, Promotion, Place, and People. These are key marketing elements that are used to generate interest and increase value for the end users of whatever is on offer. There are a few methods a company can use, for one item or for the whole of the organisation.
Check out the stages below to develop strategies that could help your business.
Figure out what you want to be known for
Having a clear idea of where your expertise lies is vitally important, as it can lead you to grasp what you need to achieve to make your business plan a success. It also keeps the focus on which aspects of your organisation are the most profitable and/or successful. Once you've got that sorted, you'll be able to offer your customers a very specific differentiator. Look at both the weaknesses and the strengths of your brand to get an overall picture of which direction to take.
Research your ideal consumer
Conducting research can help you to meet current client requirements as well as the needs and wants of potential customers. Market research can also help when devising a new set of differentiators that ensures your products appeal to a wide range. Persuade customers to fill out a survey or use your services to collate information about what your customers actually want.
Create strong differentiators that suit your goal
Pinpointing which areas will make your products or services stand apart from others is essential. While differentiators may seem too wide-ranging to begin with, it's worth honing in on them to arrive at smaller subsections. You can make use of the below differentiators, along with robust people skills, to increase the chances of success:
Come up with an eye-catching brand
You want to attract people's attention. An appealing logo or strapline can help. It needs to be something that people remember. If it's not working, go for a rebrand to attract new customers from the categories you're targeting.
Tell your story
A genuine back story and an explanation of how you got to where you are today - and where you're heading - can count for a lot when marketing your company. It's a massive advantage from the start because no other company will have the same story to tell. By opening up with a motivational, and even moving, tale that engages people, you'll set yourself up to be unique in what you have to offer. This sort of information can often be found in the “About Us” section on a website.
To establish an even more personalised approach, connect with customers via social media. Here, you can create an open dialogue with those people who actually buy your products or services, ask for their honest opinions, and form more differentiation strategies along the way.
What are examples of differentiation?
It's like finding the golden egg if you stumble across an idea that gives you the edge over your competitors. Thinking innovatively and coming up with bright ideas will surely mean you'll go a long way in business.
Take the humble toothbrush. Thirty years ago, there were probably one or two choices of toothbrush you could opt for. But picture the rows and rows of them on the supermarket shelves nowadays. The variety is astonishing - from your basic wooden stick with a few bristles on it, to all singing, all dancing electric versions, complete with tongue scrubbers and patented dye within the bristles that indicate when you need another toothbrush (it's about every three months, apparently!). All new added extras to toothbrushes have come about from the creation of differentiation strategies - finding that special something that makes your product unique but also sought after.
See the list below for some differentiation strategy examples, used by household names to position themselves as more valuable and as something that you can't do without:
Using product placement and targeted advertising campaigns so that their services and products become an absolute necessity for customers
Creating blogs, hosting events, and developing apps that help clients with everyday tasks
Focusing on quality and community needs to design high quality products that either maintain or increase their value over time
Committing to ethical shopping and, as a result, making purchases from those who sell individual, handmade items
Improving fast food by only using ingredients that are of top quality
Why it's important to have a differentiation strategy
If you want to increase profit or popularity, or both, your company needs to keep evolving, finding ways in which to either branch out or come up with fresh approaches. Differentiation strategies can help with developing your niche within the industry that you work in. Here are just some of the benefits:
Increase profit margins
You'll have a much better chance of achieving bigger profit margins if you offer specialised products that are clearly of a very high quality. As your customers come to realise that paying that bit more is worth it, so your turnover and profits will increase. But you've got to be very good, providing end users with the best.
It's all about remaining unique
Differentiate yourself from the competition by offering something that no other company has. Then tell everyone about it with clever marketing and advertising campaigns.
Keep your customers loyal
High standards, consistency, and excellent customer service will keep your customers coming back for more. Brand loyalty is the pinnacle of success for a company. It reveals that the products or services provided are so top notch that existing customers can't get enough. Think of the genius idea of loyalty cards that supermarkets started giving out to customers back in the 1990s, and the Green Shield Stamps before them.
The competition can't replicate your products
Imagine coming up with an idea or product that no one else has ever thought of or can copy. It's a Dragons' Den dream. It's an advantage even when customers might have an option to buy something similar. Revolutionising products regularly will keep the customer happy with something that's fresh and novel.
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