How to build effective differentiation strategies to grow market share

In order to encourage growth and increase sales, brands need to identify what makes them unique. This article discusses why getting ahead of competition is key and how effective differentiation strategies can improve market position. It also introduces different examples of differentiation strategies and the tools required to implement them effectively.

Effective differentiation is about providing a message that the customer feels is unique. Differentiation is key to taking market share therefore, ineffective differentiation strategies will not help brands grow. To be vital to consumers, brands must apply effective differentiation strategies.

What is the purpose of Market Positioning?

The way a business presents itself to customers through promotion, price, place and product (the 4ps) is called its market position. This is how businesses make themselves recognisable and stand out from the competition. Creating a recognisable image or brand for a business through a positioning strategy is the most effective way to establish a market position. When businesses can define these 4Ps, their marketing strategy will become more effective. Some of the best examples are:

How brands can start market positioning statement and effective differentiation strategies
Source: Smartling
  • Wendy’s and Mcdonald’s have positioned themselves to offer affordable and quick meals.
  • Audi and Tesla have positioned themselves to be luxury symbols.
  • Apple and Microsoft have positioned their brands to be the best tech companies for unique products and solutions.
  • Starbucks has effectively positioned itself to be an upscale coffee shop.

Product positioning is a key marketing process that allows a brand to stand out in its target market. Strategic differentiation strategies involve knowing when and how to apply product positioning to encourage growth.

What are 7 Types of Market Positioning?

  • Customer needs – Brands need to identify what their customers need. They also need to clarify how they can fulfill this set of needs.
  • Customer perceptions – Brands need to capture the imagination of the target customer. For example, a cosmetic company that advocates saving the environment can tell a unique story.
  • Brand recognition – Visual symbols and information which allow customers to recognise a brand within the marketplace.
  • Pricing – In any market, brands with the lowest prices and reasonable quality items will always win. Remember, pricing is a primary form of competition.
  • Quality – The best way to justify a higher price is to offer a superior quality product for targeted customers.
  • Convenience – Customers choose brands which make their lives easier. This can mean usability, location, and terms. For example, customers will choose an e-Commerce website offering low prices, more variety, and free returns.
  • Customer service – Providing customers with friendly and diligent support compared to the competition.

Which effective differentiation strategies can companies implement?

Understanding Customer Needs

Effective differentiation strategies mean companies have to consider how to stay relevant and innovative at the same time. One of the best ways to accomplish this is to understand what the customer needs.

These are the best ways to truly understand customer needs and achieve effective differentiation strategies
Source: SketchBubble
What is a Customer Need?

A customer need is a motivating factor that encourages a customer to purchase a product or service. The need is huge in a customer’s decision to buy therefore, businesses should look into what a customer needs and use it as an opportunity to resolve a problem. Some things that a brand can do are:

  1. Conduct a customer analysis survey–the survey should ask questions about how the customers feel about the brand and its competition. It should also include brand awareness and attitudes.
  2. Means-end analysis–this analysis will help brands get a full picture of why customers buy. The customer’s answers sort into three groups: features, benefits, and values.
Ways to identify unmet customer needs

Brands who are aiming for differentiation should note that the best opportunities can originate from unmet customer needs. No matter how great a product or solution is, customers will not buy unless they need it. To stand out, brands should satisfy needs that are not being met.

Mapping the customer journey

Mapping the customer journey will help brands to identify customer pain points more effectively. A customer journey map will help brands visualise each process that a customer takes to interact with the product or service, making it easier to identify potential areas of improvement. There are tools that can help brands map out the customer journey. Consider: Smartlook, Kissmetrics, and Custellence.

Unique customer engagement services provided by Kissmetrics
Using existing customer data

Data can help brands identify what customers are looking for. Common customer questions and enquiries are a great source of this information. Use review chat logs, surveys, purchase histories and reviews, as well as forums and social media insights in order to find out what customers are saying about the brand.

Listening to the Voice of the Customer (VoC)

Voice of the Customer is a term used for surveys or programs which collect current data about customer opinions. It helps brands to understand how customers feel about the brand and what their needs are. When brands listen to customer opinion, they are more likely to find out what the customer needs and how to improve their brand.

Performing a competitor analysis

Competitor analysis is all about getting to know the competitor. Brands should look at what the competitor does and what it doesn’t do. This strategy will help companies stay relevant to target audiences. It also helps them to stay ahead of the competition by staying ahead of the trends.

What are some examples of effective differentiation strategies?

Effective differentiation strategies aim to make brands distinguishable from competitor brands. This means developing the brand so that it becomes unique in terms of features, design, image, quality, or customer service.

Source: Blue Ocean Strategy

What is Blue Ocean strategy?

Blue ocean strategy is all about creating a demand that doesn’t yet exist, instead of fighting against other companies. W. Chan Kim and Reneé Mauborgne developed this theory, method and toolkit. The authors outline this theory in their book, Blue Ocean Strategy, published in 2005 and republished in 2015. The strategy states that empty marketplaces have the best potential to grow. To create a successful blue ocean strategy, you need to find the best market opportunity and make competition irrelevant.

Probably the most popular example of the Blue Ocean strategy is the iPod. When releasing the iPod in 2001, Apple looked beyond what the market was currently offering and created an entirely new industry. By looking beyond what the consumers were asking for, Apple created a new but very successful product.

Tools that can improve your Blue Ocean Strategy

Strategic Canvas–A strategic canvas helps brands to evaluate current investments and market positioning. This also helps brands to understand where they are losing out and where they are gaining versus their competitors.

Who are the nonusers – This tool helps brands to consider potential new markets: the nonusers who may wait for the right solutions. Brands can create a Blue Ocean of new demand by understanding the nonusers; these include buyers who buy but are nonusers of the industry, buyers who consciously refuse the industry’s products and services, and consumers who never thought about what the market offers.

Visual exploring–This tool is the least discussed but can be very effective in the Blue Ocean strategy. Visual exploring is all about exploring what is outside your business. For example, take your staff (anyone from a management level) and spend a day in the field to conduct observational research. Some companies also do storytelling research where they allow consumers to share their day-to-day experiences and see where brands can meet needs.

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About James

James is an award winning digital strategist with over 20 years experience helping challenger brands and market leaders (Unilever, Diageo, MasterCard, HSBC) launch and scale their data-driven sales and marketing. Connect on Linkedin

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