Saturday, February 10, 2007

Segmentation, Differentiation and Positioning (Part 2 of a Series)

Differentiation



Differences between product offerings can be quite subtle. Some products grow to become so similar over time that the only differences between them remain differences that can be attributed to the marketing process – as an example, consider cake mixes. In fact, imagine that you are shopping for a specific cake mix, such as Devil’s Food Cake.

In a typical supermarket, you will find between two and four types of this cake mix: Duncan Hines, Betty Crocker, possibly Pillsbury and maybe a store brand or some other generic type of cake mix. How different can these cake mixes be? The consumer in this case will consider differentiation mainly among only two variables – brand and price. A cost-conscious consumer will opt for the cheapest alternative, while a more brand-loyal customer will select his favorite brand. But in every other way, such products are virtually identical.

Such a scenario is typical of mature products. Over the lifecycle of a product, competitors will continuously borrow the best features from competing products, so that after many years it becomes difficult to differentiate between products marketed by different companies. Brand and pricing become paramount to the continued success of such products.

Additional examples of such mature products that are difficult to differentiate include personal computers (how is a Dell laptop different from one marketed by HP?), ibuprofen (Is Advil more effective than Motrin?), and light bulbs (Is a 100 watt Sylvania any brighter than a 100 watt GE??) But when one considers introducing a new product to market, one seeks to develop a product in such a way that it will be superior to existing products – this superiority, resulting from differences in the new product, is what will create the motivation among consumers to try the new product (in combination with pricing, promotions and distribution, of course!).

While brand in and of itself can become a differentiator over time, trying to introduce a product to market based on brand-differentiation alone can be a risky proposition, as so many dot.com companies discovered during the dot.com boom and subsequent bust from 1998 through 2002. Branding is NOT a communications exercise...

What, then, is differentiation? Differentiation is simply the degree to which one product is different from other products in its category. For such differences to stand out, they must be meaningful. Differentiation can be achieved along five different dimensions – product, services, personnel, change or image. Within each of these dimensions, there are many variables one can use to differentiate their product. For example, along the product dimension, a product may be differentiated based on features, performance, durability, quality, reliability or style. Along the image dimension, products may be differentiated based on packaging, ambiance, graphics and symbols. A properly differentiated product clearly stands apart from its competitors.

The next segment of this series will explore the art and science of positioning.

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