Developing Your Differentiation Strategy: Theory and Practice

You probably already agree that differentiation is a fundamental pillar to your overall business strategy. It’s what allows for the growth of your business and is the key enabler for consistency in your profitability. Without it, your competitors will slowly eat away at your market position, stealing customers and ultimately your profits.

Much has already been written about differentiation. Differentiation is what makes the product or service you offer unique and stand out to the clients in the market you address. Your differentiation strategy are the plans you put into place to achieve that status of being highly differentiated from your competition. Michael Porter is likely the guru of differentiation in modern times. His theory identifies three approaches to achieve competitive advantage: differentiation, cost leadership, or focus. The more highly differentiated a firm is, the most likely that firm can be the market leader. It is unlikely that more than one competitor within a market segment will find long term success as the cost leader of that market. What is better is using all three of these strategies, one at a time over defined periods, to hang onto having a competitive advantage. Much like interval training is for the athlete looking for optimal results.

Differentiation is a must in today’s economy. Buyers are empowered with incredible tools to find cost effective solutions to their needs. If your product, service, or brand does not stand out, it is likely because your competitor’s product, brand or service does stand out for some reason. And most buyers very quickly get to that reason with a few clicks on the web. Whether you are advertising via traditional pull methods, or utilizing the latest in social marketing and highly targeted ads based on the web activity of your clients, without an effective differentiation strategy, you will be challenged to achieve growth and profitability over and extended time.

As stated at the outset of this blog, you likely already agree with my points. What is important to realize is that your differentiation strategy is not a one-time event. It must be a continuous effort conducted by the leadership of your company. Every day must begin with someone in the organization thinking about how to be different in value and more pertinent to the new clients you wish to win. You can have the greatest sales organization, or the most competent technical team, but if your brand does not stand out, they have a tough time. You can greatly enable their success by giving them a head start: a highly differentiated product, service or brand. It will require active execution on a continual basis. Markets change, client desires change, competition will copy your ideas, so your differentiation will need to change with it. It needs to be a continual focus and a regular strategic planning topic at leadership team meetings.

Combining your differentiation strategy with occasional pricing leadership will keep your company in balance and very attractive to your current clients and the new ones you wish to win. In the end, it will deliver growth and profitability to your company over an extended timeframe.

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