How do you harness your differentiation to drive market penetration and margins?
Does your product differentiation maximise your competitive advantage?
Are you driving all the ingredients to differentiate your products or services?
“Differentiation” is commonly seen simply as a marketing technique – one that promotes and emphasises the differences of a product or services from those of your competitors. Define what that is, and you have the starting point to your marketing collateral.
But it really is much, much more than that. It’s something that should be right at the heart of your business strategy. And to maximise its business advantage – and drive profits – differentiation should be viewed in the round: used like that, it can provide the main competitive advantage to define your business and drive it forwards.
First, some questions for you:
• Can you readily identify the distinctive nature of the differentiation of your product or service?
• How do you differentiate your firm from competitors?
• How would you articulate your distinguishing characteristics?
• How do you distinguish product and process differentiation for marketing and sales differentiation?
Defining your competitive capability
A firm’s competitive capability can be achieved through a variety of factors:
• A lower product/service price
• Differentiating its products and services from those of its rivals.
• Some firms can also pursue a strategy of focusing on dominance in a niche market.
The ability to differentiate improves the return.
Do you, for instance, have “Isolating mechanisms” which set you apart – something which you make, or the way in which you provide a service, which is hard to replicate or emulate?
These factors can act as natural barriers to protect and maintain your competitive advantage, ideally protected by intellectual copyright, trademarks or licensing arrangements.
Likewise a build of up over time in product design and process development of doing things differently from other businesses will generate “asymmetrical” special knowledge and expertise that cannot easily be copied or worked out by competitors, or make the costs of entry very expensive.
Not the same old, same old…
It can become a bigger challenge to differentiate products that resemble each other – such as similar consumer goods such as toothpaste, coffee latte, or airline flights. Here, differentiation can take real forms (such as branding or product delivery through a tube rather than a bottle) or imaginary forms. For instance, advertising that suggests that one aftershave lotion is more attractive to the opposite sex than any other.
Once a clear distinction has been established, it can be reaffirmed for years and years.
Sometimes a firm is so successful with a distinguished method of distribution of a product that within a short time it can became standard industry practice. The firm then has to look for new ways of differentiation to compensate and support growth.
So, to sum up…
Most products can be differentiated in some way – but is helps to be clear about:
• the distinctive competencies which provide the basis for competitive advantage
• What are the skill sets and organisational routines of high value workers – and how do you need to address retaining key individuals and work groups?
• What ‘isolating mechanisms’ determine the fundamental performance of your firm?
• Can your firm take more advantage of these different, better ways of doing things that have been built up over the years?
• How do you value the “asymmetry” or distinctness of your product design, manufacture of service delivery?
• How does your branding is also one way of differentiating products and services and helps to retain customer loyalty
The big question is: where do you take it from here? Are you fully up to speed in driving further profit exploitation by strengthening your differentiation and competitive advantage?
If you’d like advice or support on making the desirable first possible – and then actual – give Trevor Hills or David Wicker a call on 03302 200 105