Companies manufacturing products that satisfy the same need have to come up with a certain distinguishing factor for their product to be recognized. This is where companies come with the differentiation strategies based on minor unique details, which will ensure that their product is etched in the minds of target consumers.
The Concept Explained
The definition states that it is the process by which a product is distinguished from others, so that it appeals more to the target audience. Other than distinguishing it from its competitors, this process should ensure that the product is distinct from all other ones the company offers.
This methodology gives the product or service an edge over its rivals. It highlights its unique aspects, and also generates value for it in the eyes of the buyer, which should be any manufacturer's ultimate goal. When the buyer perceives a difference, he will remember the product and buy it, which thereby will result in higher sales for the company.
The challenge that companies face in creating product differentiation is to come up with a strategy that, not only creates value for buyers, but also makes it difficult for rival companies to emulate. Whatever the company does to achieve this can be termed as its strategy.
By modifying the basic objectives behind the product or service that is being sold, the manufacturer can differentiate it from that of its competitors.
A way to differentiate them is to link together two functions of the same firm. An example of this could be linking the sales function with the company's service function.
While entering a new product in the market, it is crucial to do so at the right time to help create the differentiation and positioning at the time of launch. The new entrant gets the first mover advantage, when the new product comes in, before any rival company comes up with the similar one.
Another aspect that could assist in creating it is the location of the firm. The closer the firm located to the target consumers, the more advantages it has over other competitors.
The total mix or variety of goods sold by a firm can also be a reason for it. If a consumer is buying a laptop from a particular brand, he would be more inclined to purchase laptop accessories of the same brand, rather than going for the other ones. Also, consumers prefer buying a variety of goods from one particular location rather than going to different places. Thus, stores selling a variety under one roof are better off than the standalone ones.
Links With Other Firms
This differentiation could also be a result of links between different firms, services, or products. There is a link between mobile-handset manufacturing companies and service providers, or automobiles and insurance companies.
The firm's reputation and goodwill can be a vital factor in this. It takes time for the company to get to a position, where it has built a wonderful reputation. But once it's there, there is no looking back. The best way a company can create an outstanding reputation is by providing consumers with top quality goods or services to give them a memorable experience.
Certain products are customized for selling consumers with what they exactly want. A good example here would again be a laptop manufacturing company, which provides customized laptops for all its customers, where they get to decide what they want in their laptops, rather than going with whatever the company has to offer.
Packaging and Advertising
The differentiation can sometimes be done, without modifying or altering the product or its features. This can be done by adopting an attractive or unique packaging, or by opting for a unique advertising campaign, which registers itself in the minds of the customer.
There are few products, which create a differentiation on the basis of their distribution channel. An example here would be that of soft-drink manufacturers. They distribute drinks throughout the country through a chain of bottlers. The company sends the main ingredients of the drink to the bottlers, which then add carbonated water and pack the drink for eventual distribution.
The amount of service and support provided by manufacturers can also create it in the market. Certain manufacturers have developed their own after-sales service centers and pride themselves in providing the best possible service to customers.
A successful strategy will shift the competition of the product from price to other non-price factors. This helps the company to strengthen its position in the market, as an increase in sales is the direct outcome of a good product differentiation strategy and execution.