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Differentiated Strategy: Building Competitive Advantage
A differentiated business and marketing strategy makes your brand stand out in a crowded marketplace. What makes a differentiated strategy effective?
There are many factors that must be assembled to create a successful business. The most important task when creating any new business is establishing a differentiation strategy that allows your business to stand out in a highly competitive marketplace.
Business success depends on the ability of a brand to establish itself as a unique market presence. There are two elements that must be considered when creating a truly effective differentiated strategy — business-focused differentiation, and marketing differentiation. Both elements are focused on increasing the visibility of a business and drawing in and retaining a larger consumer base.
We’ll proceed to break down the difference between business and marketing differentiation strategies, and analyze the components that go into an effective differentiated strategy.
Business Differentiation Versus Marketing Differentiation
A robust differentiation strategy incorporates both business and marketing elements, which can be broadly defined as the actions your business takes, and the way in which it communicates with its target audience.
Business differentiation can take many forms. A business may choose to bring a new or innovative product to market that distinguishes it from competitors, or focus on service differentiation that provides consumers with a unique supporting elements such as ease of ordering, training, or installation.
Marketing differentiation is focused on refining the elements that make a brand unique and communicating how different it is to consumers. Branding and marketing is a complex process— a company must stand out in a saturated market ecosystem and execute a marketing strategy that effectively promotes their product or service to their target demographic.
What is a Differentiated Strategy?
A differentiation strategy is focused on elevating the presence of a business within a marketplace and highlighting the things that make it different from similar competitors. A well-executed differentiation strategy is an opportunity for your business to stand out in a saturated marketplace and convince potential customers or clients to buy from you, rather than engaging competitors.
In order to create an effective differentiation strategy, it’s important to explore and assess similar businesses that operate in the same marketplace and identify those that offer similar products and services. By assessing the common factors shared by your competitors, it’s possible to identify the key elements that make your business different.
There are many factors that may differentiate your business from competitors. Business differentiators may take the form of product features or efficacy, specifications, service offerings, or pricing. Marketing and branding differentiators, on the other hand, can manifest as business naming, visual identity, or the verbal identity of a brand and the core message it delivers.
The most important factor to consider when assembling a differentiation strategy is whether or not the differentiators you choose to highlight deliver value to your potential customers. It’s important to highlight the fact that your brand delivers greater value and higher quality than your competitors through the customer experiences your business delivers, the visual identity presented within your branding, and the features that your products or services provide.
Business Differentiation Strategies
A differentiated business strategy allows businesses to provide superior value to potential customers, increasing overall profitability by capturing new customers. There are five primary ways in which a business can differentiate itself from competitors though the products and services it provides.
The most visible method of differentiating your business from competitors is through product differentiation. While the perceived difference between your offering and competitor offerings is highlighted via marketing differentiation, product differentiation is the actual physical difference in product or service features or functionality.
Product differentiation can often manifest as the features or performance of a product, the ability of a product or service to perform as advertised, or the innovative nature of a product or service. Product differentiation is a key driver in the B2B marketplace.
It’s important to note, however, that product differentiation is often a short-term differentiator. Intellectual property rights law is able to protect innovation-based differentiators to some extent, but product differentiators are inevitably duplicated over the long term.
Simple components of a business such as the customer service experience it offers or other service functions can often act as a highly effective differentiator. While the service features offered by a business don’t require sophistication, offering expanded or extended service elements such as support, training, installation, delivery, or consistency can provide businesses with a competitive edge.
Highly successful fast food chains such as Mcdonald’s are an example of service-based differentiation that focuses on consistency — consumers are aware of and attracted to the fact that they will receive the same product and service every time they purchase from a fast food chain, regardless of time or location.
The channels through which a business distributes a product or service can also function as a differentiator. The availability, ease of ordering, coverage, and accessibility of products offered by a business can draw customers away from competitors.
Supply chain and distribution plays an important role in any differentiated strategy. Many businesses are required to work with multiple distributors — by establishing open lines of communication, shared training, and standardized support, distributors networks can be transformed into key differentiators that deliver a consistent customer experience.
The relationships your personnel build with the customers they interact with is an often overlooked business differentiator. Team members and employees are able to represent your business and demonstrate credibility, competence, reliability, and responsiveness.
By hiring new team members through a stringent assessment process and providing extensive coaching, it’s possible to ensure the day-to-day client facing communications of your business differentiates it from competitors.
By ensuring products and services are delivered on time, as advertised, relationship differentiation establishes an emotional rapport between your business and customers.
In order to successfully differentiate your business from others based on price, it’s important to recognize that each customer has a variable price that they deem your product or service is worth. By segmenting your customer base and offering them a differentiated product with a similarly segmented pricing structure, your business is able to capture a larger market segment and maximize potential revenue.
Marketing Differentiation Strategies
A marketing differentiation strategy clearly defines the brand presented by a business and underlines the core unique features that make it stand out from the competition. There are three key factors that must be considered when assembling a marketing differentiation strategy.
The name of your business or company is the most important element of any marketing differentiation strategy. The name of a business establishes its identity, and functions as the primary focus for consumer attention for the life of the business — every time a potential customer refers to your business, they will use your brand name.
Your business name is a representation of the underlying ethos and core manifesto of your brand. The importance of brand naming can’t be underestimated. Major brand names become part of the everyday speech of entire consumer segments — Google, for example, is now a verb.
- When choosing a name for your business, consider the following questions:
- Who are you? Isolate the key proposition of your business and what makes it unique, then integrate it into your business name.
- Can you shorten your name? Shorter brand names are easier to remember. If your brand name is too long, your customers are likely to shorten it for you.
- Is your name manageable? Your brand name should be easy to pronounce and easy to spell. If your brand name can be abbreviated, it’s probably too complex.
- Is your name memorable? Memorability is critical in any brand name. A unique identifier will stick in the minds of consumers.
Naming, visual identity, and branding are not the same thing. The brand of a company is not necessarily your logo or the colors you use in your marketing efforts. A brand is the sum of the associations, ideas, and connotations that are associated with your business
Brand identity can be difficult to manage — the brand identity of a business is impacted by consumer response, but can be driven and shaped by your marketing efforts driven by your differentiation strategy. The universally-recognized nature of the Coca-Cola brand is a strong example of a highly differentiated brand identity — Coca-Cola isn’t unique due to it’s name or color choices alone, but the story behind the brand, its marketing efforts, and the aesthetic impact of its product packaging.
- How to develop a brand identity, though? When working on your brand identity, consider the following questions:
- What are the core values of your company, and what does it believe in?
- How does your brand portray its personality?
- Where does your brand want to be in the future?
- What emotion do you want consumers to associate your brand with?
The visual identity of a brand is applied to virtually every thing a business makes — from logo and logo colors, to the imagery used in marketing campaigns, down to the specific typeface used in copy. The visual elements that are used to communicate a brand to consumers should deliver a consistent, memorable message.
- Building the visual identity of a brand doesn’t need to be a complex process. In most cases, a brand visual identity can be established by ensuring the following factors are consistent:
- Primary and secondary brand logo
- A brand slogan or message
- A simple color palette that reflects the brand identity
- Consistency in imagery, graphics, or photography
- Advertising and marketing guidelines.
Creating a brand book can keep these guidelines consistent across all marketing and customer-facing platforms. Health and beauty brand Lush is a strong example of a highly unique visual identity differentiation strategy. The fundamental message delivered via the Lush visual identity is ethical buying and organic, chemical-free products.
What Does Your Differentiation Strategy Need?
- After establishing the key factors that make your business and brand stand out, it’s possible to establish a basic framework for executing your differentiation strategy.
- Define what you want to be known for
The primary differentiator of your brand should present consumers with a relevant demonstration of the value you’re able to deliver that your competitors can’t.
- Do your research
Performing research into the way your competitors differentiate their businesses will assist you in matching your differentiation strategy with the preferences of potential clients and customers.
- Focus on your primary differentiator
You may identity multiple differentiators that you can use to distinguish your brand from competition. Regardless of how many differentiators you choose to incorporate into your differentiation strategy, it’s important to place an emphasis on a single differentiator, placed alongside supporting differentiators.
- Tell a story
Communicating a brand story to your customers is an effective method of highlighting what makes your business different. Your company website is a great place to start when communicating your brand story — blogs, social media updates, and the “about” section of your website are a highly visible platform for communicating your brand personality.
- Connect with your audience
Sharing the things that make your brand unique is the most important element of any successful differentiation strategy. Whether you’re focused on pricing, service, innovation, or any other differentiator, a differentiated strategy is useless without an audience to receive it.
What Can a Truly Differentiated Strategy do for Your Business?
Differentiating your company from competitors is critical to the long term success and sustainable growth of any business. All businesses in all industries need a strong differentiation strategy to gain a competitive edge in saturated marketplaces.
- An effective differentiated strategy can:
- Highlight the value of your company through price, ethical drive, customer service, and many other aspects
- Communicate the unique selling proposition offered by your business to customers and demonstrated to potential customers that your solution is one of a kind
- Improve customer retention and brand loyalty
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, crypto and entrepreneurs.