Consider two light products, they are two unused products and the power are 100 watts. If you must buy one of them, which brand will you choose: Blue Sparks (U.S. $3) or White Heat ($ U.S2.5)? Customers seem unconscious of the difference between 2 products, which one is better? White Heat, of course, because this product is cheaper than 50 cents. The author will analyze this case below.
DIFFERENTIATION VARIABLES
Regarding the tools of differentiation, 5 dimensions can be utilized to provide differentiation: Product differentiation, Services differentiation, Personnel differentiation, Channel differentiation, Image differentiation (Kotler, 2000).
1.Product Differentiation
Product differentiation is the process of differentiating a product from the competitors, to make it more meaningful, favorable to customers. It is the one of the most important strategy in competition. With product differentiation, a business can get a little bit of market control and can raise the price slightly step by step for good and service.
Product differentiation is a strategy that the business create a different product to compete with the others. Businesses have to differentiate their products to avoid competitive price in market. The task of differentiation is to make customers notice product as unique.
- Ways of Product Differentiation
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Forms: raw material to make product, shape, size, handmade…
(E.g. Brioni, Honda, Samsung).
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Features: the characteristics of the products: long-lasting, convenient…
(E.g. Mercedes, Maruti).
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Performance: productivity, power of the product, high quality, durable…
(E.g. Harley, Honda, BMW).
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Conformance: Working ability and well-being of product…
(E.g. KFC, Yamaha, Honda).
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Durability: durable, firm, solid, strong…
(E.g. Electrolux, Canon).
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Reliability: the state or quality of being reliable by customers to product…
(E.g. Canon, HP).
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Reparability: fix or exchang product when something wrongs…
(E.g. Samsung, Nokia).
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Style: color, fashion… it can get sustainable competitive advantage if they attract more customer’s attention than the others…
(E.g. Coca, Lexus).
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Design: for high class business, simple and attractive products…
(E.g. Sony, Apple).
Back to the issue above about 2 product: Blue Sparks (U.S. $3) or White Heat ($ U.S2.5). Customers will choose White Heat because of the cheaper price. However, the fact that there are logical reasons why the Blue Sparks bulbs are more expensive: it is more durable. Blue Sparks 100 hours using which compare with only 60 hours for White Heat. Thus cost of Blue Sparks is 3 cents per hour and the White Heat is 4.2 cents. Considering the long term, Blue Sparks is cheaper than White Heat but people do not recognize it with a quick look. When your potential customers do not notice or can not see any difference between the products they will choose which one is cheaper. This is the reason why differentiation is extremely important, especially in an super competitive market today, when customers are confused with a lot of choices. If you do not have a differentiation or your differentiation is not easy to recognize, it is better for you to have real price competition.
The new Honda Spacy is popular in Japanese market. Its design is suitable to European customers’ body shape in general & Vietnamese customers in particular. To compete with Honda, SYM has launched Attila, a product with has nearly similarly in forms to Honda, using less fuel, fashionable with reasonable price.
Crest toothpaste has 9 different products for customers needs. It is an emotional decision to choose which one is suitable for users, but the product information has become quite detailed to target differentiated products to market segments.
2.Service Differentiation
Everyone expects good services come with your transaction. If you cannot provide good services, you cannot participate in competitive market today. Service quality is extremely difficult for competitors to imitate when they want, because the service is not an inanimate object.
It is very hard to train employees so that they can always provide high quality services. It is also a difficult for your opponents if they want to copy your service quality. Doyle (1989) said that to build a successful brand, service is the important key to gain sustainable differential advantage. According to Barwise, P. (2004): There is a solution to make a differentiation: be better.
There are some reasons to use service differentiation:
First, service quality is very hard to achieve, you will probably success or fail when using this strategy. No doubt about the big achievement if it works, but there are too many factors beyond control. Thus, the use of service differentiation factor should only be done if you have the capacity to achieve a higher quality level of opponent and maintain good quality.
Second, customers become more and more difficult; they have awareness that quality is required. As well as product quality, service quality is what customers expect you to automatically provide them.
And the last one, using service differentiation is a great risk, because the brand has guaranteed to do something, they must do it seriously. If you guaranteea great service but this is not done, the result is actually very bad. Customers will know it and your business can break apart.
- Ways of Service Differentiation
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Order Ease: adopting customization, self appearance from customers…
(E.g. Louis, Brioni).
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Delivery: the way that product or service is delivered to the customer: door to door service…
(E.g. KFC, Express).
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Installation: set up to make a product operate…
(E.g. LG, Panasonic).
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Customer Training: training customers to use equipment properly to bring the best benefit to them…
(E.g. Sony, Nekon).
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Customer consulting: offering expert advice to customers…
(E.g. Viettel, FPT).
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Maintenance and Repair: before/during/after-sales support…
(E.g. Nokia, HP).
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Miscellaneous Services: Other services offered such as maintenance, repair, product warranty, product returning, e-service, etc…
Canon’s slogan is “delighting you always” which it means customers always feels excited when they take picture by this camera. Therefore, the employees will explain clearly to customers about the camera when they have problems. If the customers understand how to use it clearly, they will not have problems. This will makes customer comfortable with the service and they will come back again. It is the strategy that Canon has used to get more follow-up business.
Viettel becomes largest telecom service provider with lots of promotion on prepay packet, post paid package, home phone and Internet, etc. Besides, the customer service is very good, when customers have any problems with product or service, the employee can help you. This 24-hour-a-day service provides a satisfaction to customers.
Volvo brand around outstanding benefits: safety. They do everything possible to improve this characteristic. This success make their competitors recognize the importance of investing in safety features of the product.
3.Personnel Differentiation
Kotler and Keller (2009) show that if you have better employees than the competitor's, you will have more sustainable competitive advantage. A company's employees should not be overlooked, it will be a important turning-point to crush the competitors. Businesses have to spend time and money to choose good employees and train their skill to become better. A well-trained production staff will makes a better quality product or service.
The businesses have to differentiate themselves to gain a competitive advantage through skillful employees who can serve customers with good characteristics: appearance, knowledge, intelligence, self restraint, honesty, courage, patience, empathy, competence, courtesy, credibility, reliability, responsiveness and communication.
Herb Kelleher (1999), CEO of Southwest Airlines said that: competitors can do everything to imitate the tangibles. They may make same policies, same prices to compete with you. But they cannot copy is the spirit of your people.
- Ways of Personnel Differentiation
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Competence: the work is well within employees…
(E.g. IBM).
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Courtesy: the good characteristics of employees to customers: friendly, professional, enthusiastic…
(E.g. Vietnam Airline, Louis Vuitton).
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Credibility: the reliability of customers to employees…
(E.g. Nokia, Nikon).
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Reliability: the ability of employees to perform function in routine circumstances…
(E.g. Suzuki, Caterpillar).
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Responsiveness: the response from employees to customers…
(E.g. Yamaha, Disneyland).
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Communication: a process of transferring information to understand the consumer…
(E.g. Barnes & Noble) .
Singapore Airlines enjoys an excellent reputation in large part because of its flight attendants. They give customers full instruction with good-mannered.
Honda pays salary for staffs are very high which motivating workers to produce the products with best quality.
Sony is a good example coming up with news. As soon as Sony develops a new product, it divides workers into three teams to view the new product as if it were a competitor's. The first team observes minor improvements, the second team observes major improvements, and the last team observes ways to make the product obsolete.
4.Channel Differentiation
Many producers do not sell products to customers directly, they use many different channels to sell products and get the orders. Channel marketing most often relates to the sale of products. Not only the producers get benefit from the channel, but also the providers of services and ideas get their commission. Products can often be sold more efficiently and effectively in lower-cost direct marketing channels. Businesses can have differentiation through their distribution channels.
Companies can achieve competitive advantage through the way they design their distribution channel’s coverage expertise and performance. Effective channel strategy sometimes becomes the only way to get advantage to compete in market.
Peter F. Drucker, the management guru, once pointed out that “changes in distribution channels might be insignificant for the GNP and macro economy of a country; however, it is of vital importance for an enterprise or industry”.
- Ways of Channel Differentiation
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Channel coverage: own stores, departmental store, online retailer…
(E.g. Microsoft, Unilever).
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Expertise: the profession in various areas…
(E.g. Apple, Dell).
(E.g. Nikon).
Louis Vuitton franchises are located in 60 countries: USA, UK, France, Japan, India, Singapore, Vietnam…Moreover, Louis Vuitton also set up a single online retailer to distribute its products through over the world.
5.Image Differentiation
Brand image is the way that customer perceives product. Strong image conveys singular message that establishes the products character proposition, or the logo of the business. Armstrong and Kotler (2009) said that a brand with positive image makes customers want to choose.
when business wants to publish the message on any media, they have to consider carefully because it impacts directly the effectiveness of PR activities. Some channels use conferences, events, interviews... Depending on the object business wants to target, it will determine the selection of appropriate information channels.
A firm can build their brand image through promoting their brand identity, brand elements (symbols, logos, brand names, slogans, characters, packaging, etc), atmosphere and events. Strong image makes a good reputation and the customers will be more confidence in the brand of product (Doyle & Stern, 2006)
Business should set up their own images that differentiate them from others. It take a lot of time to build a popular image. Unfortunately, the image can be collapsed by only one bad impression.
- Ways of Image Differentiation
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Symbols: visible sign or presentation of an idea (including logos, colour…)…
(E.g. Coca, Pepsi).
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Written and audiovisual media: To advertise company/brand to public…
(E.g. Nokia, Samsung).
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Atmosphere of the physical place with which customer comes into contact: physical space in which an organisation produces or delivers its products…
(E.g. LG, Sacombank).
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Events organized or sponsored by the company: sponsorship, game show, talk show…
(E.g. Viettel, Nestlé).
Gucci is the symbol of luxury goods, such as "Gucci Loves New York" handbag collection are sold out in 2 days. A lot of rich people think that these product can reflect their VIP lifestyle.
For KFC product, people are familiar with the image of old man, white hair, wearing eyeglass. This image appears everywhere: supermarkets, stores, bars. Customer can easily identify this mage is belonged to KFC.
Starbucks is a coffee brand which is evaluated very high by customers. They said that Starbucks's system is very warm and close. Its interior is quite special with a lot of sofas.
CONCLUSION
In this report, the author has analyzed various techniques of differentiation. Differentiation in the current information age is really a great challenge for brand.
All the differences can be copied and improved, that makes differentiation becomes obsolete.
For this reason, business has to create major technical barriers with creative ways that many competitors cannot keep up or follow because the risk is too great. This can only be as the brand management and sensitivity to predict market trends to offer products and services completely distinct from competitors.
That is the reason why you should create a breakthrough to add and improve the benefits of the product with the ultimate objective is to improve the competitiveness of products on the market.
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Further reading
Armstrong, Gary, and Philip Kotler. Principles of Marketing. 8th ed. Upper Saddle River, NJ: Prentice Hall, 1999.
Dess, Gregory G., G.T. Lumpkin, and Alan B. Eisner. Strategic Management: Text and Cases. Boston: McGraw-Hill Irwin, 2006.
Gaines-Ross, Leslie, and Chris Komisarjevsky. "The Brand Name CEO." Across the Board 36, no. 6, (1999): 26–29.
Kelleher, Herb, and Sarah Rose. "How Herb Keeps Southwest Hopping." Money, 28, 1999, 61–62.
Raturi, Amitabh S., and James R. Evans. Principles of Operations Management. Mason, OH: Thomson South-Western, 2005.