Differentiation Strategy: Pros And Cons Of Differentiation Strategy

Pros & Cons of Differentiation Strategy

Paper [7] talks about whether it is really advisable for all companies to play in the niche markets via product differentiation strategy. Every company uses product differentiation to charge a premium from its customers, to build a loyal base of purchasers or to build a strong brand name.

But this is not always an effective strategy because chances of backfiring are sufficiently high. The amount of time and money demanded by differentiation is generally very high and it’s an ample amount of time for the consumers to change their tastes. Hence a company may not be able to offset its huge investments as charging a premium in such a scenario is not feasible.

Another negative consequence of differentiation

Examples like gas stations and coffee chains are ideal for such a scenario.

Case 1: Starbucks plays on style and quality and the premium it charges for such differentiation is also huge. But any other competitor could easily copy this style. The only thing then left is to differentiate on the basis of either location or chain frequency.

Hence many times imitators could also exercise these small differences and avail themselves of the opportunity of monopolistic competition.

Case 2: All gas stations have similar prices but service, shell stores are the differentiating factors. These differentiators are not long lived because of the nature of the industry. Hence monopolistic competition demands a constant up gradation of the potential product so that the players stay in the game. Fast food chains like Mcdonalds, KFC and Nirulas always come up with new schemes and products. Mcdonalds started Mc Pizza which failed leading to huge losses but such innovative ideas are really important so that their offerings are distinct compared to other players. This industry has been described as one of the most competitive of

The basic questions to be asked before making a brand should be:

1. Is there any other brand having the same differentiation strategy.

2. Will I be able to deliver the differentiation for a considerable long time?

3. Is this differentiation meaningful for the customer?

Further it also focuses on marketing myopia which could creep in due to the company’s perception that it has come out with something new. After taking all these considerations into mind the research and development, marketing and other important expenses are considered in order to deliver the expectations.

The only focus should be the customers who are the ultimate judge of the differentiation and if the marketer has the capability of striking the correct frame in the customers minds, differentiation would itself be successful.

References:-

1. Randolf Saint-Leger, Demand Media , “Pros and cons of Product differentiation”

2. Management Study Guide, “Positioning and Differentiating the Market Offering Through Product Life Cycle”

3. Marty Zwilling, “5 Keys to Product Differentiation for Fun and