Differentiation – based marketing strategy


The differentiation route to strategy revolves around aspects other than price. It works on the principle that a firm can make its offer distinctive from all competing offers and win through the distinctiveness. And, a firm adopting such route can price its product on the perceived value of the attributes of the offer and not necessarily on competition-parity basis.

Differentiation can be based on the Multitude of Attributes of the offer:

The interesting point is that the offer can be differentiated on any of the multitude of attributes that normally form part of any offer. Any of the over so many activities performed by the firm, tangible and intangible, can constitute a source of differentiation. The product with its innumerable features, the service and the other functions performed by the firm are all possible sources of differentiation.

The potential of the differentiation led strategy is vividly explained by Theoore Levitt in one of his classics in Harvard Business Review, ‘ Marketing Success, Through Differentiation of Anything’. In this article, Levitt elaborates that there is practically no such thing as a commodity.

All goods and services are differentiable. In the marketplace, differentiation is everywhere. Everybody producer, fabricator, seller, broker, the agent and the merchant tries constantly to distinguish his offer from that of his competitors. This is true even of those who produce and deal in primary metals, grains, chemicals, plastics and money. Through an array of examples, Levitt explains how, from the simplest of commodities to the most complicated of products, differentiation can be put to use.

In the marketplace today, companies do try to ‘achieve marketing success through differentiation of anything’. They not only differentiate on the unique features of their product, but even on plain facts like the collaboration with a valuable partner, or the location of plant, as differentiation themes. They use any particular fact/ theme that give them a relative advantage.

Examples of differentiation Route:

Modi Xerox uses its service strength and its collaboration with Rank Xerox as its differentiation themes.

Garden Silks uses its strength in design as the differentiation plank.

Eureka Forbes has successfully used home selling as its distinctiveness.

Citibank differentiates on its personalized service. It claims that it employs only professionally qualified people and the person who answers a customer’s phone call will be competent to solve all the problems raised by the customer.

To cite some more examples, IBM uses technology and service as differentiation strategy, Caterpillar Tractor uses its service strength / global dealer network and Rolls Royce, its quality.

Differentiation helps a Firm move away from Price competition:

The differentiation route is a more dynamic and powerful route in competitive strategy. Most business battles are fought on the strength of differentiation rather than price. The major temptation as well as in differentiation strategy is that it allows a firm to move away from the disadvantage of a wholly price-based fight. In other words, differentiation allows a firm the flexibility for fighting on the non-price front, on the strength of the uniqueness and specialty of its offer. Differentiation, therefore, is a crucial option for a firm in its search for a rewarding competitive strategy.

Differentiation can be adopted by a Firm only when it possesses relevant competitive advantages

It is evident that to fight on the differentiation route, the firm should have the relevant competitive advantages. Brand image, channel clout, strong collaborations, unique process, integrated production facilities, flexible production facilities and advanced R&D facilities, are all competitive advantages, and avenues for differentiation.