Business Strategies

How the Differentiation Strategy Works for Your Business

Written by Angela Ly for Gaebler Ventures

Often, following what the industry leaders are doing doesn't get you anywhere. You need to stand out from the crowd. Here, we talk about what the differentiation strategy is about.

The differentiation strategy, in a way, is self-explanatory.

It is all about being different from the competitor. But not just being different for the sake of it. Your business needs to be different in ways that matter to the customer.

Ways of Differentiation

You can be different in a whole lot of ways. For a start, you can compete by offering different product lines. You can also have the product be designed differently or contain differentiating features, and even offer a customizing service for your customers, charging them a premium for the additional service.

Your business can also be differentiated via the production process that is unique to your company. The production process can also result in a product that is perhaps more compact, has twice the number of uses, or have other attributes that are attractive to buyers.

A production and manufacturing process that creates a lower probability of defected goods is also valuable to both the business and the customer. The customer gets a more durable product that is of better quality, while the business does not spend unnecessarily on replacements and earns its reputable brand name.

Don't Over-Differentiate

It is important not to overdo the differentiation, however. That's why we need to reiterate the point on being different for a purpose. And that purpose is to create value for the customer. You make a decision on the differentiating features, and then work on incorporating them into your marketing strategy. The objective is to create awareness of your brand name and the differentiation that it carries.

You also need to be able to sustain the differentiation strategy. Ideally, the differentiating features that you have chosen are difficult for competitors to copy.

How to Achieve Product Differentiation

One way is to add features into the product that allow the customer to use the product with ease. Let the customer use the product without having to purchase too many complementary products. Customers will appreciate the simplicity in using these fuss-free products.

If the first suggestion is a big challenge because you don't have the resources for product re-design and development, then consider adding features that make the buyer happy when using it. For example, pretty packaging of cosmetic products attract scores of customers even though there may be more effective alternatives made by other brands.

Another way is focus on improving the product such that it is far more effective than what competitors can provide. For example, if you are able to make batteries that last twice as long as those from rival brands, this would ensure repeat sales.

Whether Differentiation Strategy is Suitable for Your Business

If yours is an industry in which products are constantly evolving to keep up with the times, this strategy would suit your business. An example is the music player, a product in the world of technology that is regularly pushed to the market with new features.

Alternatively, if the type of products that you sell are aplenty in the market with many competitors all offering differentiating features, it is imperative that you adopt this strategy in order to set yourself apart from others.

Perhaps the market for your products is filled with different types of buyers whose requirements vary. Adopting the differentiation strategy will help you reach out to the market segment that you have identified for targeting.

Angela is currently an MBA student at Nanyang Technological University in Singapore. Ms. Ly is looking to specialise in Finance, and has an interest in exploring topics in entrepreneurship and strategies for small businesses.

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