Differentiation and positioning are marketing strategies that most businesses have to adopt. The market is a very competitive space and your product/ services won’t survive without some distinct competitive difference setting it apart.
Differentiation and positioning are about building a unique package of benefits that appeals to your target audience. Positioning and differentiation are complementary approaches with slight differences, particularly concerning professional services businesses.
Differentiation is the process businesses use to make a product or service stand out from its competitors in ways that provide unique value to the customer.
Differentiation refers to a set of traits and benefits that distinguish a product from others and make it better for a certain audience. These attributes should ideally be items that “customers appreciate when considering options in a purchasing decision” and that “competitors can’t easily imitate.” When both of these prerequisites are met, the offering becomes more appealing to potential clients.
What’s a Differentiation Strategy?
Here’s a fairly simple way to illustrate a differentiation strategy. A professional service organization such as an accounting firm can have a vertical or horizontal position. What does that mean?
- Vertical segmentation is based on industry or category. You specialize in working with clients in a certain industry, such as health care, information technology, or travel agencies. An accounting firm, for example, might specialize in working with clients in the construction business.
- Horizontal segmentation takes into account demographic data as well as your area of expertise. As a result, one accounting company may specialize on high-net-worth individuals or families. Clients may come from a variety of industries, but they all share one trait.
It’s also possible to combine the two. For example, a forensic accountant (horizontal) only works in the construction arena (vertical) or an estate and trust accounting firm (horizontal) only works with individuals bringing in more than a million a year (also horizontal).
Types of Differentiation Strategies
A differentiation strategy is multi-pronged but can generally be condensed into three steps:
- Identifying differentiating competitive advantages.
- Choosing the competitive advantages that will build the best position.
- Selecting a global positioning strategy.
Once completed, you must then effectively communicate your chosen position to the market.
Positioning is defined as gaining a place in the customer’s mind, which is critical given the abundance of replacements on the market. The company’s ability to position itself correctly has a direct impact on its profitability and long-term survival. Positioning is primarily done by product and brand.
Four main types of positioning strategies
There are four main types of positioning strategies: competitive positioning, product positioning, situational positioning, and perceptual positioning.
- Competitive positioning involves comparing your product or service with that of the competitors.
- Product positioning includes creating benefits for customers by aligning those features with specific needs.
- Situational positioning includes positioning your product as a solution to the specific needs of targeted customers.
- Perceptual positioning includes changing how people feel about their situation by altering perceptions.
The major distinction between positioning and differentiation is whether a corporation concentrates on controlling and advertising its products and brand with the goal of acquiring a space in the customer’s mind (positioning) or producing a unique product with few substitutes (differentiation) (differentiation). In order to achieve the desired objectives, the organization must guarantee that the planned positioning and differentiation initiatives are successfully commu nicated to customers.