Product differentiation is a marketing strategy that businesses use to distinguish a product from similar offerings on the market. For small businesses, a product differentiation strategy may provide a competitive advantage in a market dominated by larger companies. The differentiation strategy the business uses must target a segment of the market and deliver the message that the product is positively different from all other similar products available.
When a company uses a differentiation strategy that focuses on the cost value of the product versus other similar products on the market, it creates a perceived value among consumers and potential customers. A strategy that focuses on value highlights the cost savings or durability of a product in comparison to other products.
The product differentiation strategy also allows business to compete in areas other than price. For example, a candy business may differentiate its candy from other brands in terms of taste and quality. A car manufacturer may differentiate its line of cars as an image enhancer or status symbol while other companies focus on cost savings. Small businesses can focus the differentiation strategy on the quality and design of their products and gain a competitive advantage in the market without decreasing their price.
A successful product differentiation strategy creates brand loyalty among customers. The same strategy that gains market share through perceived quality or cost savings may create loyalty from consumers. The company must continue to deliver quality or value to consumers to maintain customer loyalty. In a competitive market, when a product doesn’t maintain quality, customers may turn to a competitor.
No Perceived Substitute
A product differentiation strategy that focuses on the quality and design of the product may create the perception that there’s no substitute available on the market. Although competitors may have a similar product, the differentiation strategy focuses on the quality or design differences that other products don’t have. The business gains an advantage in the market, as customers view the product as unique.
Product and deletion
The process of deleting a product is the most difficult decision that a company needs to take when a particular product is not performing in a way it was desired to be. There is also many advantages that the company gets as a result of product deletion and hence the process of product deletion becomes important for the company. Some reasons why product deletion is important are :
- A drain on financial resources of the firm : If a product is not running properly in the market and is not generating enough revenue though it is been provided with all the financial resources of the company, the resources that are invested would be wasted if it is used for weak product, those resources can be used to produce a new product that might do better than the existing product.
- Marketing problems: Sometimes there is a situation that a company creates a large number of products in a single line. This leads to the overpopulation of the products and the marketing resources are used too thinly. Also there are chances of excess competition among the company’s own set of products and creates confusion in the minds of the customers. In these cases the companies go for deletion of the product.
- Managerial problems: When a product is weak it acts as a burden on the company and the management attention. A weak product may require an intense managerial efforts with respect to its price, distribution, sales etc. A weak product may also lead to weakening the image of the company and dissatisfaction among the intermediaries