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Product Differentiation Helps You
Build Competitive Advantage

Your Strategic Marketing Process Must Include A Differentiation Strategy

Product differentiation is a critical strategic marketing process. A differentiation strategy is key to building your competitive advantage. Use an example marketing plan to build your marketing mix product program.

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Businesses need to continually differentiate their products from their competitors. If there is no differentiation, why would a customer buy your product compared to a competitive product?

As a small business owner, you know that you need to build your products or services with unique value or unique competitive advantage.

However, fairly quickly, your competitors will copy, or even improve upon, your unique values or advantages, and therefore the advantage is soon lost.

Most highly valued attributes become commodity features over time.

To combat that loss of advantage or uniqueness, your business needs to be continually developing new value and benefits in existing products or services and/or developing new products and services to remain in a market leader position.

What is Your Key Competitive Advantage?

impact of a good differentiation strategy

As part of your business' growth strategy, your market segmentation, your target marketing and marketing mix, you need to consider your product life cycle and how you can extend it (and why you want to extend it).

You also need to consider the impact of the economy, your competition, your customers and your resources; and you need to consider how to differentiate your product and how to position it in the market.

How to differentiate becomes the first challenge you must address.

As a small business, you do not have infinite resources. One way of differentiating is through brainstorming new products, new features, new benefits (and testing the outcome before implementation). Another way of differentiating your business is through a customer-focused approach.

Your Product Differentiation Strategy:

If you have been in the market place for a while, ask your customers what they want and need from your products and what product differentiation variables they value.

  • What are the basic needs - price, on time delivery, etc.?
  • What are the expected needs - level of quality, level of service?
  • What are the desired needs? These would be nice to have, but not necessarily deal breakers (for example, if service is important to your customer they may feel that having a live person on the phone would be a desired need, rather than a voice mail system).
  • What would your customer really be amazed and delighted to receive? For example, a follow up call within 24 hours of each delivery to ensure customer satisfaction?

Unique Value in Product Differentiation:

Once you have answers for these questions, you can decide on your unique value approach to your customers. Do a value chain analysis to review your position compared to your competition.

You must listen to what customers say, then give customers what they want, and sometimes give them what they don't know they want.

The industry in which you operate can have an affect on product differentiation. Be very clear on type of industry you are operating in; review an example marketing plan in your industry:

  • a large volume industry (differentiate on a low-cost or highly diverse basis);
  • a specialized or niche industry (differentiate on an opportunities basis - look for specialty applications of your product/service);
  • a mature industry (differentiation is challenging and entry into this market will be difficult unless you have a very unique approach, highly successful sales staff, and a big marketing budget);
  • or a fragmented industry (for example, graphic designers often operate as independents in many markets - it is difficult for them to gain a large market share and developing a strong, unique competitive advantage is challenging but not impossible).

Strategic Marketing Process and Differentiation:

Your ability to create a viable business growth strategy through differentiation is limited by the product itself.

Differentiation must fit. When developing your product differentiation plan, assess whether or not the following can be unique and whether or not that uniqueness is a competitive advantage:

  1. The size, the shape and the components of the product (for example, a cup of coffee can be short, tall, etc.);
  2. The features of the product (for example, a cup of coffee can be extra hot, non fat, with a extra shot, etc.);
  3. The product performance or product quality (for example, is it the best tasting coffee made from the best quality coffee beans, served piping hot - or to the customer's requirement);
  4. The product performance consistency (for example, is that cup of coffee the same quality every day, in every location);
  5. The life cycle of the product (for example, will coffee be replaced by tea or soft drinks or will coffee have a long life cycle);
  6. The reliability of the product (this is different from consistency; no more cup of coffee examples - this is about reliability of performance - is the product going to be working for what the customer would expect to be a reasonable period of time (if you buy a stove do you expect it to perform without problems for 1, 5, 10, 15, 20 years) - even though warranties may be defined for a period of time, customers do not expect or want their product purchased to fail the day or week or month after the warranty expires);
  7. Is the product easily repairable? (for example, is it more economical to replace the product if it fails than to repair it - that is not good, design a product that can last for a long period and be easily repaired at least for what your customer would consider to be a reasonable period of time);
  8. The style and design of the product (how does it look, is the design useful (back to the cup of coffee example); does the lid fit properly on the take-out cup).

Build Your Unique Value Proposition

To compete effectively, you need to build a strong product differentiation plan. It is important that you clearly understand how your product can be differentiated (this can be on one or more variables) and it is important that this product differentiation is one that is desired by your customer.

There is little benefit in having a highly differentiated product that no one wants to buy.

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Additional Reading:

Understand Competition Analysis and how to manage your competitive tactics.

Build strong Market Strategies to win more market share.

Or for more on how understanding market share will help your business compete, read about What is Market Share? Part 2.

Return from Product Differentiation to the Definition of Marketing.

Read more about how to Define Marketing Mix (Part 2 of two parts on overall marketing mix).

Or return to More For Small Business Home Page.

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How Voice Marketing Inc. Helped Us?

Marketing Plan, Strategic Plan and More

Kris has worked with our association to produce a marketing plan some years ago that helped us achieve an increase in our membership of 26 percent.

This past year she worked with us again to produce a comprehensive strategic plan that we are implementing. The plan focuses on our strengths, weaknesses, opportunities and threats and market segmentation.

It provides an in-depth situational analysis, opportunity analysis, marketing mix program, and action plan (with measurements in place to enable us to track progress, or lack of it).

Kris has also presented a number of workshops for our members: Website Optimization Tips; Effective Business Networking Techniques; How to Optimize LinkedIn; and Marketing 101.

We value her knowledge and commitment.

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The work that Kris and her company, Voice Marketing Inc. have done for us has helped us to continually improve.

Marilynn Knoch, Executive Director, BC Printing and Imaging Association (BCPIA)

Marketing and Life–Cycle

Marketing is a requirement for all businesses: without marketing strategies and tactics your business will struggle to survive.

Not all marketing activities are planned: you might be building your brand recognition through a social media campaign (that's marketing); you might be conducting market research to analyze your competitors and/or segment and target your potential market or to develop the most desirable features, advantages and benefits of your products or services (that's all marketing).

Marketing is pretty all–encompassing; and a challenge for many business owners. The additional challenge is recognizing that the different stages of your business life–cycle: start–up, mid–cycle, mature or late–in–life.

During start–up you need to develop your marketing strategies to grow sales; for example, you might want to use a market penetration pricing strategy to build sales quickly.

During mid–cycle, you need to grow your customer base (often through lead generation) and that need requires different marketing strategies, such as cold calling on prospective clients, email marketing, newsletter and blog sign ups and distribution (all to grow your list of prospects).

During the mature cycle, you need to build your marketing efforts around your brand; your competitive advantage can be in your reputation, history, and identity and on what differentiates your business from your competitors.

Marketing your products and services is not something that you do once (such as a marketing plan) and then never change or do again. You need to be continually researching and building your strategies and tactics to be ahead of the market, and ahead of your competition.

The market is constantly evolving; ever more rapidly with the impacts of globalization and technology. You need to invest resources into marketing to ensure that you build and sustain your business.

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Outsource Your Marketing

If you need support in your marketing efforts, or if you'd like a review of your marketing plan, contact us for more information on our marketing services.

If marketing is not your core strength, or if you don't have enough staff to commit to developing your marketing efforts (and acting on the plan), outsourcing your marketing strategy and implementation will allow you to concentrate on developing your business.

Start with a marketing plan that includes the necessary research, strategy development and implementation action plan. We provide you with the plan tactics, budget, schedule and key performance measurements.

Execute the plan yourself or have us at Voice Marketing Inc. manage the execution for you.

Once the plan is implemented, we report on the actions we've taken, the performance of the tactics employed, and on the results.

You'll feel confident that your business marketing is being effectively managed and continually evolving.

We specialize in providing services to small business owners and understand that marketing efforts must be customized for each business' unique needs.