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Product Differentiation Focus

 

A product or business with a differentiation strategy appeals to the mass market but seeks to set it apart by offering a product that is better than the competitors in some way that matters to the customer, like features or quality. Consumers are typically willing to pay more for these products because of the convenience and effectiveness that they offer.

Generic focus strategies gain in their overall attraction as more of the following conditions are met:

  • The industry has a wide variety of customers and different customer needs, thereby providing the opportunity to target products at many different segments.
  • The focused segments are not being targeted by strong rivals.
  • The focuser has built up unique capabilities or resources that allow it to serve the targeted niche in ways that are difficult for rivals to match.
  • The niche targeted by the enterprise’s products is large enough to be profitable and may also grow over time.
  • The market share leaders in the larger product category don’t perceive the niche as one that is crucial to their profitability.

A focused strategy based on differentiation aims at securing competitive advantage by offering the targeted niche customers something they perceive is more closely aligned to their own unique needs or preferences compared to the products offered by rival sellers.

This strategy focuses on a narrowly defined segment and seeks to differentiate the product based on product features, service, or convenience. The philosophy is that the focused strategy can serve the unique needs of the market better than any generalist. Local wineries often successfully employ this generic strategy.

The number and type of products offered in a product line will depend on what category the product is in. If a category is dominated by value brands with little differentiation, a variety of product types with innovative features will not be appreciated in the marketplace. Differentiation and innovative features should be saved for categories dominated by high-end niche markets where consumers are willing to pay more for product quality and features.

Product- versus Customer-Related Perspectives on Differentiation

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An assumption underlying most businesses is that in order to be viable, the company’s goal is to grow and prosper over time. The growth can occur in profits, market share, geographical reach, and the like, but fundamentally, a company’s overall product strategy in order to realize these goals will fall into the differentiation or low-cost strategy categories. Porter’s Generic Strategies, as they are known, are attractive because they can be applied to one-product firms or multinational corporations. In short, the low-cost strategy seeks to gain competitive advantage by bringing a product to market, which is equivalent to competitors’ in features and quality, at a lower price than the competitor. The differentiation strategy is where the company seeks to gain market share by offering a product that has superior features, quality, or services than the competitors.

 

A perceptual map can be a useful tool to understand where the consumers see firms in the market place in terms of image and product offerings. Not only can a perceptual map help managers understand where their product stands relative to other products in the marketplace, it can reveal holes or openings in the marketplace, where a company may want to direct future efforts.  A perceptual map deals with the following questions:

  1. 1. What criteria customers use to evaluate competitive product offerings
  2. 2. How important this criterion is in the marketplace
  3. 3. Where our product is perceived in the marketplace relative to competitors

The ability of  product differentiation analysis to help the analyst categorize markets and position products according to segments ensures maximum efficiency in an overall product line. The process of analyzing the product line can reveal actual or potential cannibalization, duplications, met or unmet customer needs and wants, and availability or shortcomings of market size or structure. The overall strategy of a company’s product line is improved when viable segments are identified, and resources are allocated with the intent of satisfying needs and communicating product attributes effectively.

 

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