What are the typical methods of differentiation?
Differentiation is when a producer tries to make its products significantly different from rivals, or at least to persuade consumers that there is a fundamental difference worthy of staying loyal to the brand and paying more.
Main methods of differentiation
A firm may differentiate itself from competitors by:
A. Looking different. By focusing on specific features which make the firm distinctive and recognizable. Marketing departments spend considerable time and money on features such as color of products, logos and trademarks, design, shape or the convenience of products and outlet layout.
B. Branding. Here the company builds a certain image into its products. Name association, presentation awareness, personality links seek to maintain product and corporate awareness. A strong corporate identity and customer loyalty provides the firm with a range of opportunities such as premium pricing.
C. Providing better services. Offering better services for customers such as better in-sale and after-sale services. This may include home delivery by a supermarket, extended guarantees and a range of differentiation financial offers such as credit.
Differentiation and 8Ps of Marketing Mix
Successful product differentiation requires marketing support to promote a business and its various products. Common methods of differentiation revolve around 8Ps of Marketing Mix:
1. Product. Differentiation of product means making a product (a good or service) stand out from similar products offered by competition. This gives the business a competitive advantage which can increase sales and target sales more effectively. It also enables the business to charge premium prices for its products, so that the firm can increase its profits. Common methods used to differentiate the product on the market include product improvements, new editions, specialized versions, changed packaging, unique features, etc. Distinctive features of a product could include its color, size, quality, design and performance:
- Color. Different flavored potato chips, chocolate bars or drinks can be distinguished by their color. The same applies to company logos and packaging.
- Size. Products of different physical size can make it stand out such as large-sized TV sets or cars are sold at a premium price. On another hand, products of small size can also be preferred when it comes to laptop computers, cameras, mobile phones or cosmetics.
- Quality. Better quality products usually stand out from products offered by rival firms. Premium quality is usually achieved by using better quality raw materials and the manufacturing process. Think about high-quality German cars, American university education or French wine.
- Design. The beautiful design of products such as American technological products, Italian clothes or Japanese minimalistic furniture plays a vital role in attracting customers to make the purchase.
- Performance. Some cars are faster than other cars. Some computers are faster than other computers. Some machines can work longer than other machines without maintenance. The better the performance, the more different the product is going to be from the average one in the industry.
2. Price. Differentiation of price is mainly achieved by using different pricing strategies to sell a range of products from cheap economy brands to expensive premium brands. Also different prices are offered based on the number of products the buyer intends to purchase – higher for retail quantities and lower for bulk buying. Additionally, many businesses offering services charge different prices based on levels of service.
Example 1: Airlines such as Lufthansa or Delta Air Lines offer both first-class tickets, business class tickers and economy-class tickers for air travel.
3. Promotion. Differentiation of promotion can be done through using various promotional methods such as Above-the-Line Promotion (ATL) including advertising and Below-the-Line Promotion (BTL) including sales promotion, personal selling, direct mail, trade fairs and exhibitions, sponsorship, Public Relations (PR), viral marketing, branding, slogans, logos, packaging, Word-of-Mouth (WOM) or direct marketing.
Example 2: McDonald’s is using the Golden Arches logo since 1953. While Nike has the swoosh sign, Adidas is using the triple stripes to make customers identify their products with the company.
4. Place. Differentiation of place may happen either by choosing to distribute products directly to customers or use a distribution channel with intermediaries. Companies can also use various intermediaries in the distribution channel including wholesalers, retailers, agents or distributors. As the Internet continues to grow as a sales channel, having an online presence and using E-Commerce to market its product while other companies rely only on physical locations is another form of differentiation of place. Other specialty channels include vending machines, telemarketing and mail order and direct mail.
5. People. Differentiation of people in a business organization revolves around quality of employees – unique and special skills, vast product and market knowledge as well as experience. Quality employees can offer customers satisfactory customer service including a high degree of support, professional advice and after-sales care. The right people can help the firm to develop a reputation – that competitors find hard to match – which will make the business more attractive.
6. Processes. In short, two differentiators for service providers as a source of competitiveness include efficiency and convenience. Differentiation of processes might include the option of purchasing the product on the website or in the app, online payment options, the high efficiency of home delivery of the product to the customer’s door, etc.
7. Physical environment. The appearance of the business premises including the observable aesthetics and tangible appearance may give the business competitive benefit by being an important differentiator. Physical appearance is especially important for companies offering services which last for many hours such as hotels, restaurants, gyms, amusement parks, hair and SPA salons, airports, banks, schools, universities, etc.
8. Packaging. Product presentation can make the difference whether customers choose the product over another product. For example, Japanese and Chinese consumers are very particular about packaging. Businesses can use packaging in a variety of ways to differentiate such as the use of colors, materials, patterns and graphics, shapes, etc. Packaging can also be used as a form of adding value (e.g. glass bottles can be reused as flower vases) or promotion (e.g. logos placed on shopping bags) which can help to differentiate the business from competition.
Example 3: The Coca-Cola’s iconic glass bottle and vending machines, the Pringles’s potato chips cylinder container, the Toblerone’s chocolate triangular shape packing, the IKEA’s furniture flat packs, etc. can be recognized by their unique packaging.
Additional methods of differentiation
Other methods of differentiation related specifically to customer service include:
Purchase terms. Some businesses offer special purchase terms in order to attract customers by making it more convenient for them to buy the product right away. These may include possibility of pre-ordering, 0% financing (or a zero-interest loan), payment in installments, hire purchase, additional insurance options, ‘buy now, pay later’ trade credit plans, order tracking, etc.
Customer relations management. Managing relationships with customers in the exceptional way can build a competitive advantage for companies in the service sector where the level of customer care is very important. This includes hotels, airlines, private schools, banks, high-end retailers, etc. which highly rely on their staff to deliver a first-class customer experience.
After-sales care. There tends to be various after-sale services for customers who buy products to better satisfy their needs. These may include term guarantees, installation and assembly services, regular maintenance, live support, replacement of broken parts free of charge, favorable product return policies, etc.
Example 4: IKEA typically offers a 10-year guarantee covering defects in materials and workmanship. Some of IKEA products are also guaranteed for as long as 25 years. In addition, IKEA also allows its customers to return the product in good condition within 60 days or within 365 days for members of the company’s loyalty program IKEA Family.
Creativity and imagination of members of the marketing team will determine how well the business will do in its attempts for differentiation. While knowledge is limited, imagination is endless.
