Differentiation strategy
Category: Marketing
The C company has chosen the two following strategies:
To obtain differentiation of its products — differentiate it from the products of the competitors by covering special needs which the customers considers useful and valuable and integrating the corresponding characteristics in the product/services
To make sure that the realisation of the differentiation strategy is embodied in the entire market width, i.e. the largest number of market segments.
The company seeks to develop and sell products/services which differ from the competitors’ products and which have special qualities in complete agreement with the needs of the customers and which clearly differentiates itself from the other products offered. The company seeks to attach the customers to the company through a high customer preference manifested through the fulfillment of important needs.
It is important that the company is able to identify the customer needs, i.e. areas of differentiation converted into qualities in the product/service and which a broad segment of the customers find useful and valuable. It requires thorough knowledge about market conditions which can pick up any changes in customer needs. The strategy demands a continuous identification of new areas for differentiation which can be used as competition advantages.
The company can create an important customer preference in many ways dependent on the trade line. It can be the product itself, the system of distribution and sales or prompt delivery of spare parts, repair, etc.
The risk of choosing a differentiation strategy could be that the company faces high production costs per unit and therefore not able to compete on costs. Another risk could be that the market need becomes more uniform and thereby resembles a homogenous market where price is the most important parameter. Finally, there is a risk of competitors copying the specific competence and consequently compete on price due to the low development costs.