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Differentiation strategy is a business approach where organizations make a unique and distinct offering to their customers to stay ahead of their market competitors.
The main objective of implementing a differentiation strategy is to increase competitive advantage. This strategy can be accomplished by strategically analyzing the internal strengths and weaknesses of the business and effectively allocating them to enhance the overall value of delivery.
What is differentiation strategy?
Building a successful differentiation strategy usually requires good research and planning to gain an in-depth understanding of what the customer really needs and desires.
According to Michael Porter’s 1985 competitive advantage model, there are three ways to uniquely position yourself in the market: Cost leadership, differentiation, and focus.
Many companies focus on cost leadership as a competitive advantage strategy while many others try to stand out from the crowd with something unique that differentiates them from the rest.
The third way to gain competitive advantage is by focusing on niche identifiable customer segments and gaining superiority by satisfying them.
In reality, it isn’t easy to apply any of these strategies successfully, especially in the case of highly competitive industries. Below are some illustrative differentiation strategy examples that will inspire you on your journey to gaining a sustainable competitive advantage.
Apple
When we talk about differentiation, Apple is one of the brands that will most often come to our minds. Started in 1976 by Steve Jobs, Ronald Wayne, and Steve Wozniak, the company has had an unquestionable impact on the consumer electronics and computer software industry. Since its inception, Apple has been well-known for its innovative products.
Apple Inc. – A Giant with a Market Value of $2 Trillion
And it has successfully managed to distinguish itself from its competitors through a multi-layered approach by focusing on the following USPs (Unique Selling Points):
Product design
The iconic, elegant, and minimalist design of Apple’s products is one of the first things that makes the brand stand out from its competitors. Their products display an elegant visual style and represent the simplicity of the device.
Operations system
Apple’s unique operational system is reflected in the enhanced user experience that bridges the gaps that were unseen or unaddressed by its competitors.
Emirates Airlines
Based in Dubai, Emirates is the state-owned airline and flag carrier of the United Arab Emirates. The company operates about 3,600 flights per week to more than 150 cities covering 80 countries. The following USPs differentiate them in the airline market:
Exceptional customer service
Emirates takes great care of its passengers and provides them with exceptional service and commodities throughout the journey. A passenger survey of Emirates highlighted the following service attributes:
- High-quality, regionally inspired dishes from the flight destination
- In-flight digital entertainment with over 4,500 movies to choose from
- Complimentary beverages
- On-board Wi-Fi
Tesla
With a mission to direct the world towards sustainable energy, the American electric vehicle company initially entered the market with the idea of targeting wealthy environment-concerned customers in the luxury sector. The following attributes make the company stand out and differentiate itself from its competitors:
Product innovation
Tesla entered the automotive industry by offering a market-disruptive electric vehicle that customers were amused at. This vehicle is not only environment-friendly and extremely high-tech but also has a very distinctive and beautiful aesthetic design.
Earlier over the years, many companies have tried building electric or hybrid cars, but none of them matched the detailed and elegant design that Tesla was able to achieve. With Tesla product innovation has also extended to include the following tech and design functionalities:
- The possibility to customize the car
- Solar panels and supercharging compatibility
- Self-driving features
- The material used to build up the vehicle
Marketing strategy
Tesla used a unique marketing strategy where they reduced their reliance on traditional TV advertisements and instead, they relied more on referrals and word of mouth.
They are applying an extensive unique pull strategy to attract customers to the brand. This is also reflected in the use of the brand CEO, Elon Musk as a marketing clue himself. The controversy and mentality of Musk is a marketing element of its own creating more buzz around the Tesla brand.
The above brands have made extensive efforts to analyze consumer behavior to understand their customer’s needs, characteristics, and preferences. They have gained a competitive advantage with their tailor-made product offerings catering to those customer needs. By adopting various differentiation attributes, these brands have become leaders in their respective industries.
An international MBA will provide you with a deeper understanding of consumer behavior, brand management, and differentiation strategies that will guide you through innovative and out-of-the-box ideas and strategies to lead in your respective industries.
