5 Levels of Market Differentiation Strategies

5 Levels of Market Differentiation Strategies

Every brand faces the dual challenge of positively influencing growth (by capturing new customers) and doing it in a way that promotes loyalty to the brand.

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Every brand seeks to differentiate

Strategic differentiation is the key.

The struggle for differentiation may take many different forms.

The brand’s differentiation strategy should change and evolve as the market matures and competition intensifies.

The 5 primary market differentiation strategies can be charted for comparison based on market penetration and market maturity

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User Experience Differentiation

Technology Differentiation

Price/Quality Differentiation

Product Differentiation

Customer Service Differentiation

Market Maturity

The 5 Market Differentiation Strategies

Technology Differentiation

A new technology may provide sufficient value for differentiation in the market. Mobile operators make liberal use of this strategy (think 4G, HSPA, WAP).

The use Price/quality differentiation fosters a calculative behavior where customers continually shop for the next best deal. This in turn leads to customerchurn and increased acquisition costs.

Price/Quality Differentiation

Mobile network operators in the U.S. have “innovated” this differentiation strategy so thoroughly that the majority of customer now have virtually bottomless bundles of text or voice minutes.

Product differentiation often leads to market confusion which can paralyze customer spending. Also, too many “big new” things can freeze spending as consumers fear buying something that may be quickly obsolete.

Product Differentiation

Long used by the consumer electronics industry, this strategy is designed to overwhelm the consumer with features and specifications to provide the value proposition.

Differentiating on customer service may be more costly for the brand in that it requiresthe infrastructural support and continual advertising or messaging to remind the potential customer of the service offer.

Customer Service Differentiation

Moving up the differentiation scale and focusing on superior customer service is a way to avoid the limitations of a product/service play. This strategy is used frequently by the insurance and investment industries.

User Experience Differentiation

In a commoditized market, differentiating based on an emotional bond with the customer is both very powerful and difficult to do successfully. The brand that is able to build emotional or social connections will have fiercely loyal customers with low churn.

How to differentiate using the User Experience strategy.

Research what your consumers aspire to. Find out what excites them, what their affinities are, what idols they have? The customer dialog must extend into the realm of individual values, aspirations, and social interests.

How to differentiate using the User Experience strategy.

To make an emotional bond, the brand values must match what the customer aspires to. These aspirations may include the environment, social responsiveness, exclusivity, career ambition, family, security, fun and style.

How to differentiate using the User Experience strategy.

Refining the brand experience may include creating extensions of existing brands that are designed to suit the intended customer segment. The key is “target”. A single “one-brand-fits-all” approach will only build experiences with a generic customer.

How to differentiate using the User Experience strategy.

The key metric to gauge success with this strategy is the customer’s ability to brag about the experience. Are they cooler, more stylish, more caring, or smarter for choosing your brand?

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