A differentiation strategy offers important advantages and disadvantages for firms that adopt it. would provide faster and better service than its competitors could. For example, few business owners would argue that putting the customer first improves the success of their business. In this article, we discuss what a differentiation strategy is, how to create one and how a differentiation strategy can benefit your business. It represents a greater value for the customer, created either by lower prices or by providing greater benefits and services that justify higher prices. Advantages and Disadvantages of Product Differentiation. Table 5.5 Executing a Differentiation Strategy. What Are The Advantages And Disadvantages Of Creating A Differentiation Strategy? Thus a For example, you may prefer a pharmacy that provides quality service and treats you like a person instead of an anonymous face. differentiation, a key advantage is that effective differentiation creates an ability to obtain premium prices from customers ("Executing a Differentiation Strategy" [Image missing in This study enhance our understanding of the role of HRM practices and differentiation strategy on the competitive advantage of firms listed on Nairobi Securities Exchange. This strategy is usually associated with charging a premium pricefor the product - often to reflect the higher production costs and extra value-added features provided for the consumer. market share as a result. Specifically, IBM had enjoyed a great deal of success in the mainframe computer market by providing superior service and charging customers a skills to fix their own mainframes. Coca-Cola’s while its sales volume ($421 billion) was twelve times as large as Coca-Cola’s. Advantages of Product Differentiation 1. A disadvantage of this strategy is that with limited competition, also comes limited demand. A business owner who relied on a mainframe to run her company could not afford to have her mainframe out of operation for long. A company must develop its own strategy for its differentiation strategy. Bridge the gap between the market demand and your product features. Differentiation strategies have … A company must use their advertising, as well as the marketing methods employed, to express what makes it unique. The Basic Building Blocks of Organizational Structure, Reasons for C hanging an Organization’s Structure, Leading an Ethical Organization: Corporate Governance, Corporate Ethics, and Social Responsibility, Corporate Ethics and Social Responsibility. Flexible Manufacturing Systems A flexible manufacturing system is a computer-controlled process used to produce a variety of products in moderate, flexible quantities. A company should try to provide the best service it can to maintain its differentiation strategy. One way to do this is with a differentiation strategy. By providing these things, customers receive great customer service and keep coming back for more. offerings remain differentiated. Ultimately, it will lead to better competitive positioning for your brand. The CEO of a company that uses a differentiation strategy has the ability to provide a product that is made with real passion. A company that uses a differentiation strategy can strive to become leaders in their industry. 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Understanding Thought Patterns: A Key to Corporate Leadership? Many soda drinkers are fiercely loyal to Coca-Cola’s Differentiation strategy 1. Differentiation Strategy Prof. (Dr.) Nitin Zaware Prof. (Dr.) Nitin Zaware 1 2. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. In contrast, store-brand sodas such as Sam’s Choice In other cases, customers desire the unique features that a firm offers, but competitors are able to imitate the features well enough that they are no longer unique. The analysis illustrates that there are benefits and costs associated with the adoption of an integrated cost and differentiation strategy in firms’ effort to attain competitive advantage. As a result, they must be offered at very low prices to move from store shelves into shopping carts. Because customers perceive the unique customer service or product features as special, a company following a differentiation strategy is typically less sensitive to price fluctuations than the general market. It Reduces The Risk Of Market Saturation. Pepsi and other brands have a hard time convincing loyal original]). This contrasts with a more universal, mass market approach, in which the same product is … A successful product differentiation strategy creates brand loyalty among customers. Differentiation can be an effective business-level strategy to the extent that a firm offers unique features that convince customers to pay a premium for their goods and services. Express Your Uniqueness Through Your Advertising And Marketing. Reduced price competition. Creating a differentiation strategy can also help the company reduce its competition. (which is sold at Walmart) seldom attract loyalty. Unlike the Cost Leadership strategy, the Differentiation strategy allows multiple products to co-exist as long as they concentrate on different attributes. If a firm can achieve cost leadership and differentiation simultaneously, the benefits are great because differentiation leads to premium prices, and at the same time that cost leadership implies lower costs. In order for a company to convince consumers that its product includes unique features, it needs to communicate this information to the consumers. In other words, buyer These companies use advertising to show consumers the differences. loyalty makes a customer unlikely to switch to another firm’s products if that firm tries to steal the customer away through lower prices. From a customer’s perspective, a person would be foolish to pay more for an IBM personal computer since IBM did not offer anything unique. Here are the possible benefits of creating a differentiation strategy: 1. 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