What is the term used for products that firms try to make different from their competitors?
No matter what stage your business is in, you want to stand out and prove that your product or service has a unique advantage. This can help you at all points, from attracting investors to getting your company started to getting customers to buy, and the best way to do this is by developing a strong differentiation strategy. Show
In this article, we’re going to take a closer look at what differentiation strategies are, some great examples you can model your strategy after, and how to build your own. Key Takeaways
What Is a Differentiation Strategy?A differentiation strategy is a business strategy that revolves around making your company, product, or service unique, so it stands out from other businesses in your industry or market segment. While you should strive to provide something totally new and novel to your customer, no matter what industry or market you’re selling in, it’s most important to differentiate yourself within your industry. You want to make sure that your product is different (and better) than any direct competitors’ products. Examples of Differentiation StrategiesIt can be hard to think of ways to differentiate your company without examples and models to look to. But, differentiated companies are everywhere, and you might not even realize that your favorite places to shop or eat at have done a great job of making their products and services unique. One way to tell that a company succeeded in differentiating itself is to look for imitators. If a bunch of new companies sprang up and tried to copy the product or concept of another company, you can be safe in assuming that the original company had a great idea. Let’s take a look at some popular examples of differentiated companies:
Benefits of a Differentiation StrategyA few of the benefits of a strong differentiation strategy are:
Because of all of these great benefits, implementing a good differentiation strategy isn’t as easy as brainstorming why your company or product is better. But, your hard work can pay off in the long run when you outsell your competition. Typically, it takes months to form your differentiation strategy, which requires extensive research, testing, implementation, and moving away from your current strategy. You’ll want to research your sales and analyze where you outperform your competitors. You also need to consider any customer feedback and how you provide a service that other companies don’t. The best differentiation strategies are based on thorough research and analysis. You should also test out your differentiation strategy if possible. This could mean holding focus groups or even asking friends and family for feedback on new slogans, product design, or anything you decided to change about your product. After evaluation and testing, you can implement your differentiation strategy. You should make sure you’re keeping tabs on any changes in sales and analyzing the data to make sure your changes positively impact the company. Basis of DifferentiationThere are three main ways you can achieve differentiation. While the three levels of differentiation are all related, you’ll need to take different approaches to achieve differentiation on all three levels. Just because you aim to be different on one level doesn’t mean you can’t change things up on all three. Great companies have differentiation at all levels to make them truly unique and one of a kind.
Testing Your DifferentiatorsOnce you’ve come up with what sets your company apart, you need to test those differentiators to make sure they’re worth developing into a strategy. If they don’t check these three boxes, you need to either make adjustments so they do or choose different differentiators to focus on:
How to Make a Differentiation StrategyTo successfully differentiate your product, you’ll need to go through a lot of research, analysis, and testing to find what works for your company, product, consumer, and industry. There’s no one-size-fits-all approach to differentiation since that would defeat the purpose of creating unique companies or products. Here’s a general checklist to keep in mind:
When creating your differentiation strategy, there are two approaches you can take. One is a broad strategy where you try to stand out in your industry or differentiate yourself from your competition. This is similar to the company-level differentiation that we mentioned earlier. Broad strategies focus on providing a product or service that has a broad appeal so you can reach a wide market with your offerings. The other strategy is a focused one where you appeal to a niche market and make sure your product is perfect for that small population. For this, you’ll want to have an idea of what you’ll be known for and have a lot of knowledge about your small target audience so you can optimize for their tastes and needs. You can make yourself unique to a small audience based on all three levels of differentiation, and all three work well to help you stand out in your niche market. If you’re choosing a niche product or service, you may have less competition. Still, your competitors will be just as fierce and motivated as you, so good differentiation is critical in these markets. Other Types of Differentiation StrategiesThere are additional ways of categorizing differentiation strategies. One is broad vs. focused:
Differentiation can also be categorized as horizontal or vertical:
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