Tuesday, February 02, 2021

Product differentiation strategy

Differentiation is a business strategy where firms attempt to gain competitive advantage by increasing the perceived value of their products or services relative to the perceived value of other firms’ products or services.

Product differentiation is the act of making products different from one another. It is a strategy used to influence consumer connoisseurs of unique products that is a competitive advantage over similar products. In essence, a product is considered to have different values and attributes in the eyes of the consumer rather than the attributes of other similar products.

Product differentiation strategy can be a tool of competitive advantage which is adopted by organizations in order to provide products that satisfies individual customer’s needs.

This might involve tangible differences such as quality, reliability, performance, or design. Alternatively (or in addition), it might be based on intangible elements such as reputation and branding. In general, companies that implement strategies based on product differentiation will create differentiation and customer groups.

To be effective, the message of differentiation must reach the clients, as the customers’ perceptions of the company are important.

The implementation of differentiation strategy will produce a high-quality product. This possibility involves high costs in all areas of functioning in order to support differentiation strategies. Differentiation is a viable strategy for earning above average returns in a specific business because the resulting brand loyalty lowers customers' sensitivity to price.

Differentiation1 requires the investment of resources – typically time, capital cost, and higher variable costs – in a risky bet that the customer will respond to the differentiated product by buying it at a premium price and/or more frequently. It is the ability to sell its differentiated product at a price that exceeds what was spent to create it that allows the firm to outperform its rivals and earn above-average returns.

The implementation of differentiation strategy in the long term can improve the company’s performance, increasing brand image, improving distribution channels, and excellent service system, as well as the customer group.
Product differentiation strategy

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