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Differentiation

Differentiation. Two types: Quality or Feature based or Perception based. Quality or Feature Based Differentiation strategies. HOW TO DIFFERENTIATE 1. Features: are characteristics that supplement a product’s basic function Firms could offer either a

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Differentiation

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  1. Differentiation Two types: • Quality or Feature based or • Perception based

  2. Quality or Feature Based Differentiation strategies HOW TO DIFFERENTIATE 1. Features: are characteristics that supplement a product’s basic function Firms could offer either a - “bare bones” model and provide optional features or - offer the complete product Follow a strategy to continuously introduce new features - Japanese electronics manufacturers - Contact recent buyers - Survey - Introduce new features after analyzing tradeoff between “value to customer” and cost to firm

  3. Different types of quality 1. Performance Quality: Strategic Planning Institute (SPI) found a positive correlation between high quality and ROI. In a study of 525 units, ROI Low Quality 17% Medium Quality 20% High Quality 27% Quality leads to - Premium price - Repeat purchase - Loyalty - Positive word of mouth Three strategies Continuous improvement /maintain quality / reduce quality.

  4. 2. Conformance quality - degree to which design and operating characteristics come close to target standard 3. Durability - products expected operating life e.g. Volvo has highest mean life Customers will pay for durability if - product is not a “high fashion category”, - there is no technological obsolescence - durability does not come with an excessive price.

  5. 4. Reliability - Probability that a product will not malfunction within a specified period. e.g. - Maytag - Oster blenders - 2% returns because blade was rusting within two years. Lowered it to 0.5%. - Mitsubishi (Motorola’s Quaser Division) TV receivers - 141 defects out of 100 sets - reduced to 6 defects out of 100 sets - Buyer complaints reduced by 90% - Warranty liability reduced to 10% 5. Repairability - Ease of fixing - Caterpillar parts division

  6. Differentiation based on … Style - How well the product looks and feels to the buyer. - Packaging of cosmetics - Jaguar - GM hired Pinifarina, an Italian designer, to design the Allante’ - Herman Miller - office furniture - Olivette - office machines - Swatch - watches Design - Integration - Italian design - apparel and furniture - Scandianvian - functionality aesthetic - German - austerity and robustness - Braun - design, engineering, and manufacturing - Bang and Olufsen - stereo and television

  7. Services Differentiation • Delivery - speed, accuracy, care - Deluxe Check Printers - Shipped out one day after receiving the order • Installation - IBM delivers all equipment to the site at same time. - IBM moves competitors equipment as well. • Customer training – General Electric - McDonald employees attend Hamburger University • Consulting - McKesson Corporation - 12,000 independent pharmacists. Helps set up accounting and inventory systems - Milliken and Co.

  8. Differentiation based on Personnel • Competence - skill and knowledge • Courtesy - friendly, respectful, and considerate • Reliability - consistency and accuracy • Credibility - trustworthy • Responsiveness - quick response • Communication - make effort to understand and communicate e.g. McDonald’s - courteous Singapore Airlines - beauty and grace IBM - professional Disney - upbeat Image differentiation - Marlboro Man Identity versus image. Identity - how companies aim to identify itself to its customers. Image - how an individual perceives the company - singular, distinctive, and emotional

  9. DEVELOPING A POSITIONING STRATEGY Points of differentiation should be • Important • Distinctive • Superior • Communicable • Preemptive • Affordable • Profitable Product needs a USP ( Unique Selling Proposition ) Perceptual maps or Positioning Maps - Tools for positioning

  10. POSITIONING Positioning refers to creating and communicating a mental image that a consumer possesses about a brand’s position relative to other competing brands PERCEPTUAL MAPS are used as tools in guiding positioning strategy. They describe (1) The number of dimensions consumers use to perceive different brands. (2) The positioning of current brands (3) The positioning of ideal brands

  11. Uses of Perceptual Maps • Understanding immediate competition • Image measurement – how customers and non-customers perceive the brand • Market segmentation • New product development - Gap analysis • Advertising effectiveness • Repositioning

  12. Type of data needed to develop the maps Judgments of similarities • Respondents use their own criteria. But criteria is influenced by brands or stimuli being evaluated. • One problem with these maps is that it is difficult to label dimensions.

  13. Why position at all ? 1. We are an over-communicated society • Advertising spending in US is $376.62/year/person versus $17 for the rest of world - 30,000 books published - 10 million tons of news 94 pounds/year/person NY Times Sunday - 4 1/2 lbs.; 5000,000 words - Television - 7 hours/day 2. Product explosion 25,000 SKUs UPC - 10 digits 3. Advertising media explosion Therefore the product’s message and position needs to be heard and registered in the consumer’s mind amidst all the noise.

  14. Positioning by Al Ries and Trout 1. Be the first - pioneering advantage 2. Strengthen current position - give a reason - Avis – We are No. 2, so we try harder - 7-Up – The Uncola 3. Look for the hole: Milky Way candy - lasts longer United Jersey Bank - fast moving bank 4. Deposition/reposition the competition Lenox/Royal Doulton - both from England Lenox made in New Jersey

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