A differentiation strategy is a business strategy which involves presenting a unique product or service to consumers, one that is different, and distinct from what their competitors have to offer.

In a world where the demand and supply curves are constantly on the move due to changing consumer needs as well as external technicalities, differentiation comes in as a very important tool to create a cutting-edge competitive advantage.

Differentiation as a blue ocean strategy

In their book, Blue Ocean Strategy, authors W. Chan Kim and Renee Mauborgne explore several aspects that can help futuristic businesses and leaders to see outside or even without the box in the aim of creating uncontested market spaces, and make competition irrelevant. That is the whole reasoning behind the differentiation strategy – decimating competition. Experts in the strategic thinking and planning quarters have developed a plethora of models to guide businesses in how and where to differentiate, but in this article, I will adopt 4 main attributes, namely; utility, price, cost and adoptability.

  1. Utility

This is what many businesses call product features or attributes. Above all, before even talking about differentiation, one basic requirement a product must meet is that it must be exemplary, it must be great. A product that is not great does not even deserve to be out here talking about differentiation, it ought to be in the design phase. While talking about product utility, there are five levels of product expectations developed by economist Philip Kotler. The five product levels are:

Core benefit: This is the simplest way to mean the product must meet its most basic or required needs. For example, in the hotel industry, at least s hotel should have food, meaning it should solve hunger problems for customers.

Generic product: This refers to a product that has only those attributes or features that are absolutely necessary to support its functioning. In this case, the hotel must at the very least have chairs to sit on, tables to place the food on and other necessary amenities.

Expected product: This refers to the set of attributes or features that consumers expect of the product during the time of purchase. In this case, they would expect the hotel is clean, has parking space, is safe and conducive.

Augmented product: This level of product expectation refers to where a brand goes above its mandate to include additional features, benefits or attributes, thus making its product stand out from the crowd. For example, the hotel could provide valet, loyalty programs and even membership.

Potential product: This level of expectation refers to inclusion of next-level features that delight, or should I say wow customers due to their innovation. Our hotel in this case can have 

The five levels of product/service expectations

Once we have made sure we are dealing with a utilizable product, now we can talk about the next strategy in differentiation, price

  1. Price
    Before we even go very far, there is something I would like to make very clear so that we are on the same page. I am and will not try to make you believe that the lowest price is always the best price. Instead of doing that, I’d like us to agree on strategic pricing. While price is not the only basis for competition in the modern market space, it definitely is one of the most useful basis for product differentiation and customer comparison. Based on a brand’s target market and customer base, a company should be able to select the most strategic price that gives room for growth while keeping competition off, not necessarily by lowering the price, but by meeting and exceeding customer expectations. The Forbes Business Council gives a list of some of the strategies businesses can adopt to try and figure out what the strategic price is.
  1. Cost
    Cost is an integral aspect of the unique selling proposition (USP) of a business. Costs affect the value addition by determining how much of the value proposition a brand can afford to put into a product. For example, if the cost of making a phone waterproof makes the phone unaffordable, and thus makes it unattractive to the customers, then it can, in many cases, make a business worried of going that direction as it would risk. But the real question is, if that is what is going to make the customer experience improve and hence the purchases, are there better ways of achieving the product differentiation while keeping costs within reasonable limits? Remember, chances are, the costs incurred will determine the price you settle on, directly or indirectly, which means high costs will most likely translate to inevitable unreasonably high selling prices. 
  1. Adoptability
    The biggest and maybe most notorious problem with many products is that while they are great, offered at affordable prices and produced at reasonable costs, they are simply not adoptable to the market. This is more like a case of bad timing. The easiest way to make a great impact and create an uncontested market space is to make sure your product can be used, and if it cannot be used, to make sure there are measures to overcome the constraints that could be standing between the great product and its adoption. Such can include training, offering complementary products and even trials.

While this article talks about standing out of the crowd in a crowded industry, brands should strive to generate ideas that make them invent new markets and make competition irrelevant, which is what is called blue ocean strategy.

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