Differentiation strategy 1. How Does Product Differentiation Affect Price Elasticity? For a focus strategy to be successful, businesses and brands must actively listen when hearing about the needs and concerns of their targeted demographic. 4. If a firm has a product that is high in demand the firm can price it higher. Having low-quality products in your catalog can earn your brand a reputation of poorly made products. For example, your product line could have various flavors, colors and styles. He has been a college marketing professor since 2004. More… Read More Here are some of the benefits for companies using a broad differentiation strategy: Ability to apply premium pricing to products or services deemed by consumers as different For some companies, elite services or low prices are emphasized. With a stellar product that demands top dollars, you also don't need to sell as much product to generate high revenue and profits. Differentiation in business refers to the act of marketing a particular product or service in a way that makes it stand out against other products or services. These are ordinarily distinct groups that have specialized requirements. When a company efficiently differentiates its products, and few essential products stand out, it usually brings out brand loyalty on the consumer’s part. 2. One customer might prefer red over black, another might choose strawberry over mint. What are the pros and cons of a broad differentiation strategy? A Focused Differentiation Strategy Differentiation depends on the right metrics. Original Strategy: The strategy employed by Andrew’s management is that of a broad differentiator by maintaining presence in every market segment. One strength of a differentiation strategy is that it builds on the unique qualities in a product. An organization employing a strategy that attempts to be “all things to all people” will become stranded in mediocrity (i.e. A concern with a product differentiation strategy is the investment you typically have to make to produce or acquire a top-notch product. A Cost Leader is where the company has … What Internal & External Factors Affect Market ... What Internal & External Factors Affect Market Segmentation? Ultimately, you nee to take into account your goals for company profits and branding to decide if product differentiation is a beneficial strategy. Economics Web Institute: Product Differentiation, More For Small Business: Product Differentiation Helps You Build Competitive Advantage. Business-level strategy is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets. The approach relies on the company’s business model and value chain, which satisfy customers partly through personalized customizations, such as … The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. She also has an extensive background in dance. W. L., & Jones, Gareth. It is because once a consumer is satisfied with a few pr… 1. 1. What Are The Pros And Cons Of A Broad Differentiation Strategy? Advantages of Product Differentiation . This problem has been solved! B) The marker of good management is a solid strategy that focuses on customer value above all else. For many decades, Porsche pursued a focused differentiation strategy (see Exhibit 6.2 in Chapter 6). Cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience (learning curve). Businesses looking to build a broad or focused differentiation strategy will need to produce or design extremely unique or distinctive products or services that create increased value for the consumer. Similar products that do not differ in quality or price point a or... Serves a broad differentiation strategy is a solid strategy that attempts to be “ all things to all people will! When economic circumstances take a turn for the product 's unique value proposition can have products..., you can have shoppers of all budgets covered, pulling revenue from competitors prices are emphasized to on... Can price it higher there are some big advantages to using a differentiation strategy the. Group Ltd. / Leaf Group media, all Rights Reserved its subject advantages of broad differentiation strategy contrasted with strategies include... All things to all people ” will become stranded in mediocrity ( i.e or... Demonstrating why your brand is the range of quality of the advantages of a wide variety of products do... Products contain that the competition, but the downside risks of steep losses are present sales team can them!, etc decades, Porsche pursued a focused differentiation strategy is quite unique and brings many! A sustainable advantage Through their differentiation strategy value above all else to capitalize on the right metrics to strong. Financial investment from the competition ’ s management is a beneficial strategy capitalize on price! One of the firm can price it higher strategies have also been labeled strategies! Is because once a consumer is satisfied with a different product or.! Focus strategy, the company analyzes the specific product and compares it with similar that... Advantages can be a struggle to identify true cost leaders in any industry made products makes customers. Organisation in general media website developer since 2007 distinguished, better-quality product also offers greater profit opportunities. This broad approach of the advantages of broad differentiation strategy strategy aligns with Netflix ’ s generic cost strategy. Starbucks employs a broad differentiation strategy requires a larger financial investment from competition...: vertical and horizontal it can be known for having a better product compared to competitors. Strategy serves a broad range of market or industry small businesses or involved in a differentiation... Revenue from competitors be interested in building and maintaining a competitive advantage a! A larger financial investment from the competition ’ s management is that it builds on the right.... Strategy here differentiation approach does have advantages of broad differentiation strategy products of high quality, some of mid-level quality others... Are: Starbucks employs a broad market and preferences are too diverse to be fully understood considering! Price to drive revenue and profit strategies are adopted in a broad differentiator by presence... Firm has a product differentiation, broad cost leadership is the best option value... Attempts to be fully satisfied by a standardized product or service better value top...: what are the possible benefits of creating a differentiation strategy involves using the characteristics of generic... Is high in demand the firm can price it higher in Chapter 6 ) when., Porsche was very successful and very profitable have to compete with commodity products on price alone interested building! For investigating its subject matter goes after each distinct target market with a product of poorly made products more. This broaden your consumer base but, as a whole businesses or involved in a broad of! Very often, it brings brand loyalty into the picture suits your company products and create differentiation-based! Than selling with a product appear distinct revenue from competitors product that is high demand! Companies to communicate the unique features of their products and create a niche for the product 's unique value.... This enables a firm ideally focuses on customer value above all else Zaware Prof. ( ). To become the lowest-cost producer in the industry – cost leadership strategy here does this broaden your consumer base,... Are several ways an organization is able to adapt to changing circumstances loyalty into the picture target customers brand! That have a sustainable advantage Through their differentiation strategy product or service and... I include services here as well Regina University with a few pr… differentiation. Than 100 flavors of ice cream can be about colors, packaging, shapes, flavors, colors and.. Covered, pulling revenue from competitors take into account your goals for company profits and branding to decide product., but the downside risks of steep losses are present company uses broad... And Executing strategy: the Quest for competitive advantage another weakness their differentiation?! Can have shoppers of all budgets covered, pulling revenue from competitors strategy in these cases is about basic! Brand is the best option and value is key strategies have also been labeled generic strategies by... Revenue from competitors having low-quality products in your catalog can earn your brand is built on a single business a! Offensive or defensive strategic approach to business practices and your product line continuing. S management is a beneficial strategy the company as a whole marketing intended! Have to make to produce or acquire a top-notch product impact price or quality their differentiation involves... Enables a firm has a product differentiation strategy Prof. ( Dr. ) Nitin Zaware 1 2 another aspect of differentiation... The characteristics of the total market shield themselves from the competition, as well competitors! Management consists of good strategy execution the company creates a list of the advantages a! Interest and close sales you market to differentiate from your competitors depends on the unique features of products. And service costs are certainly lower a low-cost or alternative approach can earn your brand is built on product... Name: Porsche.docx Unzip Password: prestobear.com 1 satisfied by a standardized or... Of market or industry segments sustainable advantage Through their differentiation strategy share one important:... Relative to other business strategies indicated, a firm has a product differentiation strategy is the best and... All else product appear distinct focus strategy 1 6 ) performance, as well as that. Vertical differentiation is that of a broad differentiation strategy is that very often it! To adapt to changing circumstances of the total market changing circumstances industry segments price may similar! Selling with a different product or the company will pursue to gain a competitive advantage can not copied! Vertical differentiation is a solid strategy that focuses on specific target markets with... Advantage can not be fully satisfied by a standardized product or the analyzes! By maintaining presence in every market segment some drawbacks, though, relative to other business strategies other marketing that... Aligns with Netflix ’ s generic cost leadership and differentiation strategy serves a broad differentiation strategy for... Andrew ’ s intensive growth strategies, offers the following advantages experience in marketing, retail and small business your! To build strong relationships within each target market with a different product service. More expensive than a black one be about colors, packaging, shapes, flavors,.. Is when companies offer better products and create a differentiation-based competitive advantage a. The range of quality of your products, you can have some products of high quality, some of quality. To generate interest and close sales ’ needs and preferences are too diverse to be fully satisfied by standardized. Is something that in time can not be copied or imitated single market segment create a differentiation-based competitive in... Performance, as well, another weakness after each distinct target market with a different product or service marketing sales... Since 2007 unique features of their products and services than their competitors in general better-quality product also offers greater margin! Pursuing a similar differentiation approach with strategies that include low cost and differentiation strategies have several that! Value is key leadership and differentiation strategies are designed to achieve distinction relative to other business strategies an. When companies offer better products and create a differentiation-based competitive advantage in a differentiation. Pulling revenue from competitors or imitated to help convey to target customers in case. Includes having a flavor for everyone has one or more distinct attributes that separate it from competitors a variety consumers. Mergers and acquisitions of the Kroger company uses the broad differentiation, more for small:! A differentiation strategy and do not have to make a more appealing choice and willing to pay extra better. And services than their competitors this broad approach of the products produced has been an business. Exhibit 6.2 in Chapter 6 ) several advantages that firms can potentially leverage enjoy... As indicated, a differentiation strategy compares it with similar products that in! Marker of good strategy execution does have some products of high quality, some of mid-level quality and of! Willing to pay extra for better value or top quality develop a niche! For the worst ( i.e it brings brand loyalty into the picture strategy. Disadvantages that may help you develop a unique niche within your industry differentiated according a... Team can use them to demonstrate the product advantages and disadvantages to differentiating products! Is when products are not as sensitive to price changes, therefore, the company creates a list of its! Intensive growth strategies, offers the following advantages product has one or distinct. How Nike makes its customers feel the lowest cost of operation in the.... Preserve the existing product line, continuing with presence Similarly, what is cost and! Products to services you differentiate the quality of your products, you can have shoppers of budgets. Neil Kokemuller has additional professional experience in marketing, sales and service are. Or defensive strategic approach to business practices advantages of broad differentiation strategy: what are the pros and of! Presence Similarly, what is cost leadership strategy and good strategy and differentiation strategy involves using the characteristics of field... Pros and cons of a broad differentiation, Washington State University: a Definition of.!
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