Differentiation strategy, also known as unique strategy, refers to the strategy adopted to make the company’s products, services, corporate image, etc. clearly different from those of competitors in order to gain a competitive advantage. The focus of this strategy is to create products and services that are considered “unique” by the entire industry and customers.
Porter’s Five Forces Model actually only leads to two market strategies, namely cost leadership and differentiation. Cost leadership is undoubtedly the successful experience of industrial society, but in the digital economy era, as mentioned above, companies must implement differentiation strategies. Long tail theory and precision marketing also support companies to implement seemingly endless differentiation strategies.
(1) Product differentiation: mainly includes differences in style, attributes, performance quality, quality consistency, durability, reliability, maintainability, style, design, etc. For example, changes in the color of mobile phones, etc.
(2) Service differentiation: mainly includes differences in the ease of ordering goods, the speed of product delivery, whether training is provided, whether consultation is provided, whether installation is provided, whether maintenance is provided, etc. For example, providing door-to-door installation has a great impact on the sales volume of large furniture.
(3) Channel differentiation: mainly includes differences in channel strategy, channel design, channel establishment, channel management, channel maintenance, channel innovation, etc. For example, adopting multi-platform store opening and full network traffic diversion.
(4) Personnel differentiation: that is, obtaining competitive advantage through well-trained employees. Well-trained employees should have: knowledge and skills, politeness, credibility, reliability, quick response ability, good communication skills, etc. This is especially true in the cross-border B2B field.
(5) Brand image differentiation: mainly includes differences in visual system, social image, etc. A differentiated brand image is important. It can reflect the characteristics and value proposition of the product, and can convey this characteristic and convey emotional power in a significant way, thereby establishing an effective corporate image.
Implementing a differentiation strategy is beneficial to the following aspects.
(1) Establish customer loyalty to the company.
(2) Form a strong industry entry barrier
(3) Enhance the bargaining power of the company with suppliers (this is mainly because the differentiation strategy increases the marginal benefits of the company).
(4) Weaken the bargaining power of buyers. Through differentiation strategy, enterprises reduce customers’ sensitivity to price. In addition, differentiation will also increase switching costs, making customers more dependent on the enterprise.
(5) It is difficult for substitutes to enter. Because the differentiation strategy enables enterprises to establish high customer loyalty, substitutes cannot compete with them in terms of performance.
Therefore, differentiation strategy is an effective strategy for enterprises to obtain profits higher than the average of their peers. Finding differentiation that competitors cannot surpass in the short term forms the basis for building a brand.