Description
This presentation describes the marketing success through differentation.
Applications of Differentiation in Industries
Reference: Harvard Business Review Article, “Marketing Success through Differentiation–of Anything” –Theodore Levitt
Group 8
Class: MMS B Group Members: Tejas Doshi (109) Mehul Gala (111) Bhushan Mehta (128) Harsh Muchhala (133) Ankit Shah (140)
1 | P a g e
ACKNOWLEDGEMENT
At the onset, we would like to thank our college K.J.SOMAIYA INSTITUTE OF MANAGEMENT STUDIES & RESEARCH which made the completion of our project a pleasant and learning experience.
We are grateful to Prof. Isaac Jacob for giving us the opportunity to work on such an exciting project. He instilled in us the value of developing quality work. Our heartfelt gratitude to him. No work becomes successful and excellent without joint participation. Last but not the least we would like to express our heartfelt thanks to all the helping hands which directly or indirectly helped us during completion of this project.
2 | P a g e
TABLE OF CONTENTS
Sr No. 1 2 3 4 5 6 7 8 9 10 11 12 Introduction Product Differentiation Service Differentiation Channel Differentiation Image Differentiation People Differentiation
Topic
Page No. 4 6 11 14 15 18 20 21 24 25 26 27
Convenience or Accessibility Differentiation Focus Differentiation Performance Quality Differentiation Differentiation through Mass Customization Differentiation through Technology or Innovation Bibliography
3 | P a g e
1) INTRODUCTION
There are no such things as a commodity. All goods and services are differentiable. In the marketplace, differentiation is everywhere. Producer, fabricator, seller, broker, agent and merchant all try to constantly distinguish its offering from all others. To avoid the commodity trap, marketers must start with the belief that you can differentiate anything. To be branded, products must be differentiated. Physical products vary in their potential for differentiation. At one extreme, we find products that allow little variation: chicken, aspirin, steel. Yet even here, some differentiation is possible: Venky’s Chicken, Bayer aspirin, and Steel have carved out distinct identities in their categories. Procter & Gamble makes Pantene Head & Shoulders, and Rejoice shampoos, each with a separate brand identity. Procter & Gamble makes Tide, Cheer, and Gain laundry detergents, each with a separate brand identity at the other extreme are products capable of high differentiation, such as automobile commercial buildings, and furniture. Here the seller faces an abundance of differentiation responsibilities, including form, features, customization, performance quality, conformance quality, durability, reliability, reparability and style. Design has become an increasingly important means of differentiation and we will discuss it separately. In services, differentiation is o achieved through the use of technology and by offering value-added services. Here is how, Blue Dart, one of the leading courier companies in India has achieved this. BLUE DART – How it differentiates
Blue Dart, a leading player in the courier services industry in India, has become an important part of the supply chain of many companies by providing integrated services. In order to augment services, the company uses several proprietary softwares that enable clients to track and monitor shipment status. These include COSMAT 2 tracking and ERP system), TrackDartTM (to monitor shipment status), MailDartTM, lnternetDartTM (memory bank for shipment), PackTrackTM (tracking software for medium and large customers), ShopTrackTM (tracking and CRM tool for e-business portals), and lmageDartTM (online download of proof of delivery to speed up customers’ billing and recovery process). The company also provides economical packaging that facilitates customers’ sending documents at a price that includes door-to-door delivery service within India. The company has a fleet of aircrafts to provide cargo services, a ground fleet of vehicles, large warehouse space, and bonded warehouses in metro cities. The company also provides advisory services to clients to develop solutions on distribution issues.
4 | P a g e
There are two broad ways of differentiation: Product Differentiation Service Differentiation Other categories of differentiation include: Image Differentiation People Differentiation Channel Differentiation Convenience or Accessibility Differentiation Focus Differentiation Performance Quality Differentiation Differentiation through Mass Customization Differentiation through Technology or Innovation
5 | P a g e
2) PRODUCT DIFFERENTIATION
The total product concept can be explained with the help of the following diagram:
FORM Many products can be differentiated in form the size, shape, or physical structure of a product. Consider the many possible forms taken by products such as aspirin. Example: Aspirin is essentially a commodity; it can be differentiated by dosage size, shape, color, coating, or action time.
FEATURES Most products can be offered with varying features that supplement their basic function. A company can identify and select appropriate new features by surveying recent buyers and then calculating customer value versus company cost for each potential feature. The company should also consider how many people want each feature, how long it would take to introduce it, and whether competitors could easily copy it. To avoid
6 | P a g e
“feature fatigue,” the company also must be careful to prioritize those features that are included and find unobtrusive ways to provide information about how consumers can use and benefit from the feature. Companies must also think in terms of feature bundles or packages. Auto companies often manufacture cars at several “trim levels.” This lowers manufacturing and inventory costs. Example: The Zen Estilo VXi model has airbags, which is not provided in the LX and Lxi models. Also while the LXi model is equipped with an electronic power steering, the LX model does not have this feature. Each company must decide whether to offer feature customization at a higher cost or a few standard packages at a lower cost.
CUSTOMIZATION Marketers can differentiate products by making them customized to an individual. As companies have grown proficient at gathering information about individual customers and business partners (suppliers, distributors, retailers), and as their factories are being designed more flexibly, they have increased their ability to individualize market offerings, messages, and media. Mass customization is the ability of a company to meet each customer’s requirements to prepare on a mass basis individually designed products, services, programs, and communications. Example: While Levi’s and Lands’ End were among the first clothing manufacturers to introduce custom jeans, other players have introduced mass customization into other markets.
7 | P a g e
PERFORMANCE QUALITY
Most products are established at one of four performance levels: low, average, high, or superior. Performance quality is the level at which the product’s primary characteristics operate. Quality is becoming an increasingly important dimension for differentiation as companies adopt a value model and provide higher quality for less money. Firms, however, should not necessarily design the highest performance level possible. The manufacturer must design a performance level appropriate to the target market and competitors’ performance levels. A company must also manage performance quality through time. Continuously improving the product can produce high returns and market share; failing to do so can have negative consequences. Example: MERCEDES-BENZ From 2003 to 2006, Mercedes-Benz endured one of its most painful stretches in its 127year history, as its stellar quality reputation took a beating in J.D. Power and other surveys, and BMW surpassed it in global sales. As a consequence, DaimlerChrysle’s Chief Executive Dieter Zetsche and his new management team initiated a major restructuring, organizing the company around functional elements of the car—motors, chassis, and electronic systems—instead of by model lines. To improve quality, the company also made a number of changes in product development. Engineers begin testing electronic systems a year earlier than in the past. Lab workers put each new model’s electronic system through a battery of 10,000 tests that ran 24 hours a day for three weeks. Trying to uncover even the most unlikely event, Mercedes ferreted out more than 1,000 errors in the new S-Class. Mercedes now also uses three times as many prototypes of new designs, allowing engineers to drive a new model three million miles before it goes into production. As a result of these and other changes, the number of flaws in a car has dropped 72% from its peak in 2002 and warranty costs have decreased by 25% as well.
8 | P a g e
CONFORMANCE QUALITY Buyers expect products to have a high conformance quality, which is the degree to which all the produced units are identical and meet the promised specifications. Example: Porsche 911 is designed to accelerate to 60 miles per hour within 10 seconds. If every Porsche 911 coming off the assembly line does this, the model is said to have high conformance quality. The problem with low conformance quality is that the product will disappoint some buyers. DURABILITY Durability, a measure of the product’s expected operating life under natural or stressful conditions, is a valued attribute for certain products. Example: Duracell advertises itself as a long lasting battery and the brand commands a premium price.
Example: Nokia phones are also known for their durability. Buyers will generally pay more for vehicles and kitchen appliances that have a reputation for being long lasting. However, this rule is subject to some qualifications. The extra price must not be excessive. Furthermore, the product must not be subject to rapid technological obsolescence, as are personal computers and video cameras.
RELIABILITY Buyers normally will pay a premium for more reliable products. Reliability is a measure of the probability that a product will not malfunction or fail within a sped- fled time period.
9 | P a g e
REPAIRABILITY Reparability is a measure of the ease of fixing a product when it malfunctions or fails. Ideal reparability would exist if users could fix the product themselves with little cost in money or time. Some products include a diagnostic feature that allows service people to correct a problem over the telephone or advise the user how to correct it. Example: Many computer hardware and software companies offer technical support over the phone, by fax or e-mail, or by real-time “chat” online. STYLE Style describes the product’s look and feel to the buyer. Car buyers pay a premium for Jaguars because of their extraordinary looks. Example: Aesthetics play a key role in brands such as Apple computers, Mont Blanc pens, and Harley-Davidson motorcycles. Style has the advantage of creating distinctiveness that is difficult to copy. On the negative side, strong style does not always mean high performance. A car may look sensational but spend a lot of time in the repair shop.
10 | P a g e
3) SERVICES DIFFERENTIATION
When the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving their quality. Rolls-Royce PLC has ensured its aircraft engines are in high demand by continuously monitoring the health of its 3,000 engines for 45 airlines through live satellite feeds. Under its TotalCare program, airlines pay Rolls a fee for every hour an engine is in flight, and Rolls assumes the risks and costs of downtime and repairs in return. The main service differentiators are ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. ORDERING EASE Ordering ease refers to how easy it is for the customer to place an order with the company. DELIVERY Delivery refers to how well the product or service is brought to the customer. It includes speed, accuracy, and care throughout the process. Today’s customers have grown to expect delivery speed: pizza delivered in one-half hour, film developed in one hour, eyeglasses made in one hour, cars lubricated in 15 minutes. Example: Levi Strauss, Benetton have adopted computerized quick response systems (QRS) that link the information systems of their suppliers, manufacturing plants, and distribution centers, and retailing outlets.
Example: DOMINOZ have launched excellent delivery campaign for Pizza delivery i.e. “30 Minutes nai to Free”
11 | P a g e
Example: HDFC Bank has started a unique practice to capture customer loyalty through its service delivery where they send their representatives to their customers’ place to complete activities like Form filling, new product demonstration (new policies, schemes etc) Example: Reliance Industries Limited has installed a computerized system for delivery of petroleum products to ensure fuel quality to the customers. The trucks carrying petroleum products from the company’s Jamnagar refinery are sealed with special locks, which can only be opened at retail outlets, thus promising zero adulteration of fuel. INSTALLATION Installation refers to the work done to make a product operational in its planned location. Buyers of heavy equipment expect good installation service. Differentiating at this point in the consumption chain is particularly important for companies with complex products. Ease of installation becomes a true selling point, especially when the target market is technology novices. Marketers of refrigerators, air conditioners, and washing machines install the products in the customers’ premises, and explain the working of the products to the users. CUSTOMER TRAINING Customer training refers to training the customer’s employees to use the vendor’s equipment properly and efficiently. Example: General Electric not only sells and installs expensive X-ray equipment in hospitals; it also gives extensive training to users of this equipment.
12 | P a g e
MAINTENANCE AND REPAIR Maintenance and repair describes the service program for helping customers keep purchased products in good working order. Example: Hewlett-Packard offers online technical support, or “e-support,” for its customers. In the event of a service problem, customers can use various online tools to find a solution. Those aware of the specific problem can search an online database for fixes; those unaware can use diagnostic software that finds the problem and searches the online database for an automatic fix. Customers can also seek online help from a technician. PRODUCT RETURNS Example: COSTCO WHOLESALE CORP. Costco’s ultra generous return policy was perhaps the cushiest in the retail electronics business. Until recently, a customer could buy an expensive plasma TV, use it indefinitely, and take it back any time. Then he or she could use the refund to buy a newer model—often at a cheaper price. However, what was the customer’s gain was Costco’s loss. The membership warehouse chain ended up losing “tens of millions of dollars” annually with this policy. In early 2007, Costco cut its return policy for electronics to (a still generous) 90 days in California with a subsequent rollout nationwide. Some customers, who had come to rely on the trust and generosity embodied in Costco’s return policy, vowed to shop for electronics elsewhere. Yet, most realized the good times had to come to a halt. To Costco’s credit, it is now offering more technical support for installing and operating the electronics it sells; the company had discovered that most returns were due not to problems with the items so much as customers’ inability to set up today’s very complicated electronic devices. And with the exception of electronics and computers— which now must be returned within 6 months—all other Costco items can still be returned for any reason at any time.
13 | P a g e
4) CHANNEL DIFFERENTIATION
Companies can more effectively and efficiently design their distribution channel coverage, expertise & performance Example: Eureka Forbes, marketers of vacuum cleaners and water purifier in India, achieved differentiated positioning through direct-to-home channel.
EUREKA FORBES Eureka Forbes has achieved competitive advantage through the way its channel is designed. It chose the direct-distribution channel wherein the Eurochamp (as its salesperson is called) reaches out to the customers at their homes, demonstrates the products, persuades the consumers, installs the equipment, collects the money, and provides after-sales service. With a well- trained sales team, the distribution channel of Eureka Forbes provides competitive advantage through coverage, expertise, and performance.
14 | P a g e
5) IMAGE DIFFERENTIATION
A company can obtain competitive advantage by differentiating itself from the competition on the basis of its image. If a company chooses to differentiate based on image, they should keep in mind the following principle “A company or brand image should convey the product’s distinctive benefit and positioning. Developing a strong and distinctive image calls for creativity and hard work”. When competing products or services are similar, buyers may perceive a difference based on company or brand image. Thus companies should work to establish images that differentiate them from competitors. A favorable brand image takes a significant amount of time to build. Unfortunately, one negative impression can kill the image practically overnight. Everything that a company does must support their image. Ford Motor Co.'s former "Quality is Job 1" slogan needed to be supported in every aspect, including advertisements, production, sales floor presentation, and customer service. Often, a company will try giving a product a personality. It can be done through a story, symbol, or other identifying means. The following are the characteristics of image differentiation: Buyers respond differently to company and brand images. Identity and Image need to be distinguished. Identity is the way the company aims to identify or position itself or its product. Image is the way the public perceives the company and its products. An effective image does 3 things: Establishes product character and value proposition Conveys the character in distinctive way so as not to confuse it with competitor’s Delivers and emotional power beyond mental image. The image must be communicated for it to work. The communication can be through: Symbols: Logos Media: to convey a story, a mood, and a claim-something distinctive. Atmosphere: Physical settings Events: By sponsoring of events
15 | P a g e
USE OF IMAGE DIFFERENTIATION BY COMPANIES TO GAIN COMPETITIVE ADVANTAGE: Honda: The image of Honda cars has become one of its core competencies in becoming successful in its field. The models are always highly priced as compared to the corresponding models of the same segment of their competitors because they enjoy a greater and far superior image in the minds of the customers. Sony: When Sony launches their new products in the market, they are mostly highly priced as compared to their competitors products because they differentiate their products base on image differentiation and hence they can afford to elevate their prices as far as they enjoy positive image differentiation in the market. Giorgio Armani: Giorgio Armani is the symbol of luxury goods and VIP lifestyle. Most of the time, Hollywood actors and actresses are found in the boutique of Giorgio Armani which is also making the image of Giorgio Armani as the brand of celebrities. The brand image is so powerful. Louis Vuitton: Louis Vuitton has the strong reputation as it is the company of LVMH group owned by Bernard Arnault. The Louis Vuitton Company carefully cultivates a celebrity following and has used famous models and actresses such as Jennifer Lopez and most recently Madonna in its marketing campaigns for creating the image of brand of celebrities and high class people. The company announced that the former USSR leader Mikhail Gorbachev would appear in an ad campaign along with Steffi Graf, Andre Agassi, and Catherine Deneuve.
IMAGE DIFFERENTIATION BY CREATIVITY: Well, creativity is exactly what dairy farmers in Washington State have called upon to differentiate themselves and their image. Recently, a radio ad by the dairy farmers of Washington State expressed that their milk was of higher quality because of the way they treat their cows. They expressed that the difference comes from how comfortable they make their cows by providing them with cow mattresses. Among others, this differentiation could certainly appeal to animal lovers and those moving toward organic products.
16 | P a g e
Hyatt Regency Hotels: Even a seller’s physical space can be a powerful image generator. Hyatt Regency Hotels have developed a distinctive image through its atrium lobbies. IBM: IMB business definition says that “IBM means service “ and this message has been expressed by them in symbols, colors they use, slogans, atmosphere, events and employee behavior.
17 | P a g e
6) PEOPLE DIFFERENTIATION
Hiring and training better people than the competitor can become an immeasurable competitive advantage for a company. A company's employees are often overlooked, but should be given careful consideration. This human resource-based advantage is difficult for a competitor to imitate because the source of the advantage may not be very apparent to an outsider. "The intangibles are more important than the tangibles because you can always imitate the tangibles; you can buy the airplane, you can rent the ticket counter space. But the hardest thing for someone to emulate is the spirit of your people." This competitive advantage can encompass many areas. Employers who pay attention to employees, monitoring their performance and commitment, may find themselves with a very strong competitive advantage. A well-trained production staff will generate a better quality product. Yet, a competitor may not be able to distinguish if the advantage is due to superior materials, equipment or employees. People differentiation is important when consumers deal directly with employees. Employees are the frontline defense against waning customer satisfaction.
PEOPLE DIFFERENTIATION PRACTICED BY THE COMPANIES: The associate at Wal-Mart who helps a customer locate a product may result in the customer returning numerous times, generating hundreds of dollars in revenue. Home Depot prides itself on having a knowledgeable sales staff in their home improvement warehouses. The consumer knows that the staff will be helpful and courteous, and this is very important to the consumer who may be trying a new home improvement technique with limited knowledge on the subject. Another way a company can differentiate itself through people is by having a recognizable person at the top of the company. A recognizable CEO can make a company stand out. Some CEOs are such charismatic public figures that to the consumer, the CEO is the company. If the CEO is considered reputable and is well-liked, it speaks very well for the company, and consumers pay attention. Singapore airlines: Singapore airlines enjoy an excellent reputation in large part of the world because of their well trained flight attendant. McDonalds’s people are courteous, IBM people are professional and Disney people are upbeat.
18 | P a g e
Eureka Forbes: They differentiate on the basis of their sales force which is well trained in direct selling. The sakes force of Eureka Forbes possess following characteristics: They possess the required skill and knowledge They are friendly, respectful and considerate Credibility They respond quickly to customers requests and problems They communicate with the customers efficiently
19 | P a g e
7) CONVENIENCE OR ACCESSIBILITY DIFFERENTIATION
Companies can achieve competitive advantage through the way they make available their products to the customers. It means how easily the customers can get the products or how convenience it is for the customers to get the product from the market. Convenience differentiation by companies: Crocin Medicine: The Crocin medicine is differentiated based on its availability in the market to the customers. This medicine is available within one meter of distance all around the world.
Coca Cola: Coca Cola Company has used this strategy aggressively to stay ahead of their competitors in the market. They have made available their product in each and every part of the world and at all the corners of the world. Their aim is that Coca Cola should be available within one meter distance in the world.
20 | P a g e
8) FOCUS DIFFERENTIATION
This is the most important method of differentiation, and in many ways, the easiest. Here you must pick a specific way to focus your business. Once you have done that, you have an automatic advantage over larger companies because you can become more of an expert in that one field --and you can build close relationships with key customers that will be hard to duplicate. For example, you might differentiate yourself through: Location - Take advantage your closeness to prospective customers. Here the example would be jumbo-king vadapav in Mumbai. The location selected by jumbo-king vadapav outlet is normally very close to station. So people takes advantage of this location facility which then enables increased sell as well as image of differentiation with respect to location.
Customer relationships – Know customers really well, form partnerships with them, and get them to speak for you! This is very interesting kind of differentiation strategy because here you can directly be in contact with your customers. The best example in India would be AMWAY. AMWAY does not market itself in retail outlets or shops rather AMWAY solely depends on the customer networking type of marketing. Here customer builds relationship with company and also with other customers and then product benefits can be enjoyed. In spite of such a unique differentiation strategy AMWAY is able to offer world class products to particular segment of targeted customers.
21 | P a g e
Affinity relationships - Associate your product/service with a well-known person or organization. In this type of product differentiation normally beauty and health and care kind of products are incorporated. The example could be fairness cream by shehnaz hussain who is very popular for skin care will definitely differentiate product from other skin lotions and skin care cream.
One-stop shopping - Offer everything your target market needs, in your area of expertise. This is also known as expertise differentiation. In this type of differentiation specific expertise is focussed upon. The best example would be Johnson and Johnson baby products in India. J&J doesn’t sell any products across India beyond baby requirements. They differentiate themselves from other products in specific expertise which gives them more trust building and faith development towards brand. Right from baby shampoo to diapers everything related to baby products are delivered to customers with greater amount of satisfaction.
22 | P a g e
Wide selection (within your niche) - Although this one may seem to be the opposite of focus - the key is to be very specific in one dimension and very broad in another. Here the best example will be of Stapler company kangaroo. Here the product is very specific i.e. stapler. But there is wide selection of different products are available under this section. This type of differentiation gives customers wide variety of products for selection hence customers find it attractive.
23 | P a g e
9) PERFORMANCE QUALITY DIFFERENTIATION
Today some company focus on performance based differentiation. In some industries Quality is very important parameter but performance quality is also an equivalent parameter is considered. In industries like automobile, Inventors, Air-conditioners and other such electronic appliances, Performance enhancement is taken as tool to differentiate from competitors. Example in Indian context is Maruti cars. It is popular in India that Maruti cars give maximum fuel efficiency and performance. So Maruti Differentiates itself in terms of Performance driven company and not stylish or status driven company. Maruti 800 is very successful product of this company which believes in performance quality differentiation strategy.
24 | P a g e
10) DIFFERENTIATION THROUGH MASS CUSTOMIZATION
This is very modern type of differentiation strategy. Large companies use this strategy to provide maximum customer satisfaction. In this type of differentiation, the main focus is given to customized services. The best example is Dell computers. There are large numbers of players in computer and laptop/notebook markets in India. But Dell differentiates itself from competitors in terms of customized service. Any customer can go to dell website and customize whole laptop and pc as per his/her requirements. This kind of offerings or strategy helps companies like Dell to build good customer relations and increased customer satisfaction too.
25 | P a g e
11) DIFFERENTIATION THROUGH TECHNOLOGY OR INNOVATION
This is the current trend in differentiation strategies. Large companies especially in telecom, IT and Electronic gadgets are intensively using this differentiating Strategy. Here prime focus is given to Technology advancement and Innovation in products. The best example is Apple. Apple has one of the best interface in Mobile and computer systems and moreover it is very innovative then other competitive products in the same line. This kind of differentiation strategy encourages company to invest big funds into R&D and to innovate frequently to make customers life simpler and Stylish.
26 | P a g e
12) BIBLOGRAPHY
Websites visited: en.wikipedia.org www.bluedart.com www.icmrindia.org/casestudies/catalogue/InternationalMarketing www.internsindia.com Books & Articles: Marketing Management 13th Edition, Philip Kotler Harvard Business Review Article, “Marketing Success through Differentiation–of Anything”, Theodore Levitt
27 | P a g e
doc_562744428.pdf
This presentation describes the marketing success through differentation.
Applications of Differentiation in Industries
Reference: Harvard Business Review Article, “Marketing Success through Differentiation–of Anything” –Theodore Levitt
Group 8
Class: MMS B Group Members: Tejas Doshi (109) Mehul Gala (111) Bhushan Mehta (128) Harsh Muchhala (133) Ankit Shah (140)
1 | P a g e
ACKNOWLEDGEMENT
At the onset, we would like to thank our college K.J.SOMAIYA INSTITUTE OF MANAGEMENT STUDIES & RESEARCH which made the completion of our project a pleasant and learning experience.
We are grateful to Prof. Isaac Jacob for giving us the opportunity to work on such an exciting project. He instilled in us the value of developing quality work. Our heartfelt gratitude to him. No work becomes successful and excellent without joint participation. Last but not the least we would like to express our heartfelt thanks to all the helping hands which directly or indirectly helped us during completion of this project.
2 | P a g e
TABLE OF CONTENTS
Sr No. 1 2 3 4 5 6 7 8 9 10 11 12 Introduction Product Differentiation Service Differentiation Channel Differentiation Image Differentiation People Differentiation
Topic
Page No. 4 6 11 14 15 18 20 21 24 25 26 27
Convenience or Accessibility Differentiation Focus Differentiation Performance Quality Differentiation Differentiation through Mass Customization Differentiation through Technology or Innovation Bibliography
3 | P a g e
1) INTRODUCTION
There are no such things as a commodity. All goods and services are differentiable. In the marketplace, differentiation is everywhere. Producer, fabricator, seller, broker, agent and merchant all try to constantly distinguish its offering from all others. To avoid the commodity trap, marketers must start with the belief that you can differentiate anything. To be branded, products must be differentiated. Physical products vary in their potential for differentiation. At one extreme, we find products that allow little variation: chicken, aspirin, steel. Yet even here, some differentiation is possible: Venky’s Chicken, Bayer aspirin, and Steel have carved out distinct identities in their categories. Procter & Gamble makes Pantene Head & Shoulders, and Rejoice shampoos, each with a separate brand identity. Procter & Gamble makes Tide, Cheer, and Gain laundry detergents, each with a separate brand identity at the other extreme are products capable of high differentiation, such as automobile commercial buildings, and furniture. Here the seller faces an abundance of differentiation responsibilities, including form, features, customization, performance quality, conformance quality, durability, reliability, reparability and style. Design has become an increasingly important means of differentiation and we will discuss it separately. In services, differentiation is o achieved through the use of technology and by offering value-added services. Here is how, Blue Dart, one of the leading courier companies in India has achieved this. BLUE DART – How it differentiates
Blue Dart, a leading player in the courier services industry in India, has become an important part of the supply chain of many companies by providing integrated services. In order to augment services, the company uses several proprietary softwares that enable clients to track and monitor shipment status. These include COSMAT 2 tracking and ERP system), TrackDartTM (to monitor shipment status), MailDartTM, lnternetDartTM (memory bank for shipment), PackTrackTM (tracking software for medium and large customers), ShopTrackTM (tracking and CRM tool for e-business portals), and lmageDartTM (online download of proof of delivery to speed up customers’ billing and recovery process). The company also provides economical packaging that facilitates customers’ sending documents at a price that includes door-to-door delivery service within India. The company has a fleet of aircrafts to provide cargo services, a ground fleet of vehicles, large warehouse space, and bonded warehouses in metro cities. The company also provides advisory services to clients to develop solutions on distribution issues.
4 | P a g e
There are two broad ways of differentiation: Product Differentiation Service Differentiation Other categories of differentiation include: Image Differentiation People Differentiation Channel Differentiation Convenience or Accessibility Differentiation Focus Differentiation Performance Quality Differentiation Differentiation through Mass Customization Differentiation through Technology or Innovation
5 | P a g e
2) PRODUCT DIFFERENTIATION
The total product concept can be explained with the help of the following diagram:
FORM Many products can be differentiated in form the size, shape, or physical structure of a product. Consider the many possible forms taken by products such as aspirin. Example: Aspirin is essentially a commodity; it can be differentiated by dosage size, shape, color, coating, or action time.
FEATURES Most products can be offered with varying features that supplement their basic function. A company can identify and select appropriate new features by surveying recent buyers and then calculating customer value versus company cost for each potential feature. The company should also consider how many people want each feature, how long it would take to introduce it, and whether competitors could easily copy it. To avoid
6 | P a g e
“feature fatigue,” the company also must be careful to prioritize those features that are included and find unobtrusive ways to provide information about how consumers can use and benefit from the feature. Companies must also think in terms of feature bundles or packages. Auto companies often manufacture cars at several “trim levels.” This lowers manufacturing and inventory costs. Example: The Zen Estilo VXi model has airbags, which is not provided in the LX and Lxi models. Also while the LXi model is equipped with an electronic power steering, the LX model does not have this feature. Each company must decide whether to offer feature customization at a higher cost or a few standard packages at a lower cost.
CUSTOMIZATION Marketers can differentiate products by making them customized to an individual. As companies have grown proficient at gathering information about individual customers and business partners (suppliers, distributors, retailers), and as their factories are being designed more flexibly, they have increased their ability to individualize market offerings, messages, and media. Mass customization is the ability of a company to meet each customer’s requirements to prepare on a mass basis individually designed products, services, programs, and communications. Example: While Levi’s and Lands’ End were among the first clothing manufacturers to introduce custom jeans, other players have introduced mass customization into other markets.
7 | P a g e
PERFORMANCE QUALITY
Most products are established at one of four performance levels: low, average, high, or superior. Performance quality is the level at which the product’s primary characteristics operate. Quality is becoming an increasingly important dimension for differentiation as companies adopt a value model and provide higher quality for less money. Firms, however, should not necessarily design the highest performance level possible. The manufacturer must design a performance level appropriate to the target market and competitors’ performance levels. A company must also manage performance quality through time. Continuously improving the product can produce high returns and market share; failing to do so can have negative consequences. Example: MERCEDES-BENZ From 2003 to 2006, Mercedes-Benz endured one of its most painful stretches in its 127year history, as its stellar quality reputation took a beating in J.D. Power and other surveys, and BMW surpassed it in global sales. As a consequence, DaimlerChrysle’s Chief Executive Dieter Zetsche and his new management team initiated a major restructuring, organizing the company around functional elements of the car—motors, chassis, and electronic systems—instead of by model lines. To improve quality, the company also made a number of changes in product development. Engineers begin testing electronic systems a year earlier than in the past. Lab workers put each new model’s electronic system through a battery of 10,000 tests that ran 24 hours a day for three weeks. Trying to uncover even the most unlikely event, Mercedes ferreted out more than 1,000 errors in the new S-Class. Mercedes now also uses three times as many prototypes of new designs, allowing engineers to drive a new model three million miles before it goes into production. As a result of these and other changes, the number of flaws in a car has dropped 72% from its peak in 2002 and warranty costs have decreased by 25% as well.
8 | P a g e
CONFORMANCE QUALITY Buyers expect products to have a high conformance quality, which is the degree to which all the produced units are identical and meet the promised specifications. Example: Porsche 911 is designed to accelerate to 60 miles per hour within 10 seconds. If every Porsche 911 coming off the assembly line does this, the model is said to have high conformance quality. The problem with low conformance quality is that the product will disappoint some buyers. DURABILITY Durability, a measure of the product’s expected operating life under natural or stressful conditions, is a valued attribute for certain products. Example: Duracell advertises itself as a long lasting battery and the brand commands a premium price.
Example: Nokia phones are also known for their durability. Buyers will generally pay more for vehicles and kitchen appliances that have a reputation for being long lasting. However, this rule is subject to some qualifications. The extra price must not be excessive. Furthermore, the product must not be subject to rapid technological obsolescence, as are personal computers and video cameras.
RELIABILITY Buyers normally will pay a premium for more reliable products. Reliability is a measure of the probability that a product will not malfunction or fail within a sped- fled time period.
9 | P a g e
REPAIRABILITY Reparability is a measure of the ease of fixing a product when it malfunctions or fails. Ideal reparability would exist if users could fix the product themselves with little cost in money or time. Some products include a diagnostic feature that allows service people to correct a problem over the telephone or advise the user how to correct it. Example: Many computer hardware and software companies offer technical support over the phone, by fax or e-mail, or by real-time “chat” online. STYLE Style describes the product’s look and feel to the buyer. Car buyers pay a premium for Jaguars because of their extraordinary looks. Example: Aesthetics play a key role in brands such as Apple computers, Mont Blanc pens, and Harley-Davidson motorcycles. Style has the advantage of creating distinctiveness that is difficult to copy. On the negative side, strong style does not always mean high performance. A car may look sensational but spend a lot of time in the repair shop.
10 | P a g e
3) SERVICES DIFFERENTIATION
When the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving their quality. Rolls-Royce PLC has ensured its aircraft engines are in high demand by continuously monitoring the health of its 3,000 engines for 45 airlines through live satellite feeds. Under its TotalCare program, airlines pay Rolls a fee for every hour an engine is in flight, and Rolls assumes the risks and costs of downtime and repairs in return. The main service differentiators are ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. ORDERING EASE Ordering ease refers to how easy it is for the customer to place an order with the company. DELIVERY Delivery refers to how well the product or service is brought to the customer. It includes speed, accuracy, and care throughout the process. Today’s customers have grown to expect delivery speed: pizza delivered in one-half hour, film developed in one hour, eyeglasses made in one hour, cars lubricated in 15 minutes. Example: Levi Strauss, Benetton have adopted computerized quick response systems (QRS) that link the information systems of their suppliers, manufacturing plants, and distribution centers, and retailing outlets.
Example: DOMINOZ have launched excellent delivery campaign for Pizza delivery i.e. “30 Minutes nai to Free”
11 | P a g e
Example: HDFC Bank has started a unique practice to capture customer loyalty through its service delivery where they send their representatives to their customers’ place to complete activities like Form filling, new product demonstration (new policies, schemes etc) Example: Reliance Industries Limited has installed a computerized system for delivery of petroleum products to ensure fuel quality to the customers. The trucks carrying petroleum products from the company’s Jamnagar refinery are sealed with special locks, which can only be opened at retail outlets, thus promising zero adulteration of fuel. INSTALLATION Installation refers to the work done to make a product operational in its planned location. Buyers of heavy equipment expect good installation service. Differentiating at this point in the consumption chain is particularly important for companies with complex products. Ease of installation becomes a true selling point, especially when the target market is technology novices. Marketers of refrigerators, air conditioners, and washing machines install the products in the customers’ premises, and explain the working of the products to the users. CUSTOMER TRAINING Customer training refers to training the customer’s employees to use the vendor’s equipment properly and efficiently. Example: General Electric not only sells and installs expensive X-ray equipment in hospitals; it also gives extensive training to users of this equipment.
12 | P a g e
MAINTENANCE AND REPAIR Maintenance and repair describes the service program for helping customers keep purchased products in good working order. Example: Hewlett-Packard offers online technical support, or “e-support,” for its customers. In the event of a service problem, customers can use various online tools to find a solution. Those aware of the specific problem can search an online database for fixes; those unaware can use diagnostic software that finds the problem and searches the online database for an automatic fix. Customers can also seek online help from a technician. PRODUCT RETURNS Example: COSTCO WHOLESALE CORP. Costco’s ultra generous return policy was perhaps the cushiest in the retail electronics business. Until recently, a customer could buy an expensive plasma TV, use it indefinitely, and take it back any time. Then he or she could use the refund to buy a newer model—often at a cheaper price. However, what was the customer’s gain was Costco’s loss. The membership warehouse chain ended up losing “tens of millions of dollars” annually with this policy. In early 2007, Costco cut its return policy for electronics to (a still generous) 90 days in California with a subsequent rollout nationwide. Some customers, who had come to rely on the trust and generosity embodied in Costco’s return policy, vowed to shop for electronics elsewhere. Yet, most realized the good times had to come to a halt. To Costco’s credit, it is now offering more technical support for installing and operating the electronics it sells; the company had discovered that most returns were due not to problems with the items so much as customers’ inability to set up today’s very complicated electronic devices. And with the exception of electronics and computers— which now must be returned within 6 months—all other Costco items can still be returned for any reason at any time.
13 | P a g e
4) CHANNEL DIFFERENTIATION
Companies can more effectively and efficiently design their distribution channel coverage, expertise & performance Example: Eureka Forbes, marketers of vacuum cleaners and water purifier in India, achieved differentiated positioning through direct-to-home channel.
EUREKA FORBES Eureka Forbes has achieved competitive advantage through the way its channel is designed. It chose the direct-distribution channel wherein the Eurochamp (as its salesperson is called) reaches out to the customers at their homes, demonstrates the products, persuades the consumers, installs the equipment, collects the money, and provides after-sales service. With a well- trained sales team, the distribution channel of Eureka Forbes provides competitive advantage through coverage, expertise, and performance.
14 | P a g e
5) IMAGE DIFFERENTIATION
A company can obtain competitive advantage by differentiating itself from the competition on the basis of its image. If a company chooses to differentiate based on image, they should keep in mind the following principle “A company or brand image should convey the product’s distinctive benefit and positioning. Developing a strong and distinctive image calls for creativity and hard work”. When competing products or services are similar, buyers may perceive a difference based on company or brand image. Thus companies should work to establish images that differentiate them from competitors. A favorable brand image takes a significant amount of time to build. Unfortunately, one negative impression can kill the image practically overnight. Everything that a company does must support their image. Ford Motor Co.'s former "Quality is Job 1" slogan needed to be supported in every aspect, including advertisements, production, sales floor presentation, and customer service. Often, a company will try giving a product a personality. It can be done through a story, symbol, or other identifying means. The following are the characteristics of image differentiation: Buyers respond differently to company and brand images. Identity and Image need to be distinguished. Identity is the way the company aims to identify or position itself or its product. Image is the way the public perceives the company and its products. An effective image does 3 things: Establishes product character and value proposition Conveys the character in distinctive way so as not to confuse it with competitor’s Delivers and emotional power beyond mental image. The image must be communicated for it to work. The communication can be through: Symbols: Logos Media: to convey a story, a mood, and a claim-something distinctive. Atmosphere: Physical settings Events: By sponsoring of events
15 | P a g e
USE OF IMAGE DIFFERENTIATION BY COMPANIES TO GAIN COMPETITIVE ADVANTAGE: Honda: The image of Honda cars has become one of its core competencies in becoming successful in its field. The models are always highly priced as compared to the corresponding models of the same segment of their competitors because they enjoy a greater and far superior image in the minds of the customers. Sony: When Sony launches their new products in the market, they are mostly highly priced as compared to their competitors products because they differentiate their products base on image differentiation and hence they can afford to elevate their prices as far as they enjoy positive image differentiation in the market. Giorgio Armani: Giorgio Armani is the symbol of luxury goods and VIP lifestyle. Most of the time, Hollywood actors and actresses are found in the boutique of Giorgio Armani which is also making the image of Giorgio Armani as the brand of celebrities. The brand image is so powerful. Louis Vuitton: Louis Vuitton has the strong reputation as it is the company of LVMH group owned by Bernard Arnault. The Louis Vuitton Company carefully cultivates a celebrity following and has used famous models and actresses such as Jennifer Lopez and most recently Madonna in its marketing campaigns for creating the image of brand of celebrities and high class people. The company announced that the former USSR leader Mikhail Gorbachev would appear in an ad campaign along with Steffi Graf, Andre Agassi, and Catherine Deneuve.
IMAGE DIFFERENTIATION BY CREATIVITY: Well, creativity is exactly what dairy farmers in Washington State have called upon to differentiate themselves and their image. Recently, a radio ad by the dairy farmers of Washington State expressed that their milk was of higher quality because of the way they treat their cows. They expressed that the difference comes from how comfortable they make their cows by providing them with cow mattresses. Among others, this differentiation could certainly appeal to animal lovers and those moving toward organic products.
16 | P a g e
Hyatt Regency Hotels: Even a seller’s physical space can be a powerful image generator. Hyatt Regency Hotels have developed a distinctive image through its atrium lobbies. IBM: IMB business definition says that “IBM means service “ and this message has been expressed by them in symbols, colors they use, slogans, atmosphere, events and employee behavior.
17 | P a g e
6) PEOPLE DIFFERENTIATION
Hiring and training better people than the competitor can become an immeasurable competitive advantage for a company. A company's employees are often overlooked, but should be given careful consideration. This human resource-based advantage is difficult for a competitor to imitate because the source of the advantage may not be very apparent to an outsider. "The intangibles are more important than the tangibles because you can always imitate the tangibles; you can buy the airplane, you can rent the ticket counter space. But the hardest thing for someone to emulate is the spirit of your people." This competitive advantage can encompass many areas. Employers who pay attention to employees, monitoring their performance and commitment, may find themselves with a very strong competitive advantage. A well-trained production staff will generate a better quality product. Yet, a competitor may not be able to distinguish if the advantage is due to superior materials, equipment or employees. People differentiation is important when consumers deal directly with employees. Employees are the frontline defense against waning customer satisfaction.
PEOPLE DIFFERENTIATION PRACTICED BY THE COMPANIES: The associate at Wal-Mart who helps a customer locate a product may result in the customer returning numerous times, generating hundreds of dollars in revenue. Home Depot prides itself on having a knowledgeable sales staff in their home improvement warehouses. The consumer knows that the staff will be helpful and courteous, and this is very important to the consumer who may be trying a new home improvement technique with limited knowledge on the subject. Another way a company can differentiate itself through people is by having a recognizable person at the top of the company. A recognizable CEO can make a company stand out. Some CEOs are such charismatic public figures that to the consumer, the CEO is the company. If the CEO is considered reputable and is well-liked, it speaks very well for the company, and consumers pay attention. Singapore airlines: Singapore airlines enjoy an excellent reputation in large part of the world because of their well trained flight attendant. McDonalds’s people are courteous, IBM people are professional and Disney people are upbeat.
18 | P a g e
Eureka Forbes: They differentiate on the basis of their sales force which is well trained in direct selling. The sakes force of Eureka Forbes possess following characteristics: They possess the required skill and knowledge They are friendly, respectful and considerate Credibility They respond quickly to customers requests and problems They communicate with the customers efficiently
19 | P a g e
7) CONVENIENCE OR ACCESSIBILITY DIFFERENTIATION
Companies can achieve competitive advantage through the way they make available their products to the customers. It means how easily the customers can get the products or how convenience it is for the customers to get the product from the market. Convenience differentiation by companies: Crocin Medicine: The Crocin medicine is differentiated based on its availability in the market to the customers. This medicine is available within one meter of distance all around the world.
Coca Cola: Coca Cola Company has used this strategy aggressively to stay ahead of their competitors in the market. They have made available their product in each and every part of the world and at all the corners of the world. Their aim is that Coca Cola should be available within one meter distance in the world.
20 | P a g e
8) FOCUS DIFFERENTIATION
This is the most important method of differentiation, and in many ways, the easiest. Here you must pick a specific way to focus your business. Once you have done that, you have an automatic advantage over larger companies because you can become more of an expert in that one field --and you can build close relationships with key customers that will be hard to duplicate. For example, you might differentiate yourself through: Location - Take advantage your closeness to prospective customers. Here the example would be jumbo-king vadapav in Mumbai. The location selected by jumbo-king vadapav outlet is normally very close to station. So people takes advantage of this location facility which then enables increased sell as well as image of differentiation with respect to location.
Customer relationships – Know customers really well, form partnerships with them, and get them to speak for you! This is very interesting kind of differentiation strategy because here you can directly be in contact with your customers. The best example in India would be AMWAY. AMWAY does not market itself in retail outlets or shops rather AMWAY solely depends on the customer networking type of marketing. Here customer builds relationship with company and also with other customers and then product benefits can be enjoyed. In spite of such a unique differentiation strategy AMWAY is able to offer world class products to particular segment of targeted customers.
21 | P a g e
Affinity relationships - Associate your product/service with a well-known person or organization. In this type of product differentiation normally beauty and health and care kind of products are incorporated. The example could be fairness cream by shehnaz hussain who is very popular for skin care will definitely differentiate product from other skin lotions and skin care cream.
One-stop shopping - Offer everything your target market needs, in your area of expertise. This is also known as expertise differentiation. In this type of differentiation specific expertise is focussed upon. The best example would be Johnson and Johnson baby products in India. J&J doesn’t sell any products across India beyond baby requirements. They differentiate themselves from other products in specific expertise which gives them more trust building and faith development towards brand. Right from baby shampoo to diapers everything related to baby products are delivered to customers with greater amount of satisfaction.
22 | P a g e
Wide selection (within your niche) - Although this one may seem to be the opposite of focus - the key is to be very specific in one dimension and very broad in another. Here the best example will be of Stapler company kangaroo. Here the product is very specific i.e. stapler. But there is wide selection of different products are available under this section. This type of differentiation gives customers wide variety of products for selection hence customers find it attractive.
23 | P a g e
9) PERFORMANCE QUALITY DIFFERENTIATION
Today some company focus on performance based differentiation. In some industries Quality is very important parameter but performance quality is also an equivalent parameter is considered. In industries like automobile, Inventors, Air-conditioners and other such electronic appliances, Performance enhancement is taken as tool to differentiate from competitors. Example in Indian context is Maruti cars. It is popular in India that Maruti cars give maximum fuel efficiency and performance. So Maruti Differentiates itself in terms of Performance driven company and not stylish or status driven company. Maruti 800 is very successful product of this company which believes in performance quality differentiation strategy.
24 | P a g e
10) DIFFERENTIATION THROUGH MASS CUSTOMIZATION
This is very modern type of differentiation strategy. Large companies use this strategy to provide maximum customer satisfaction. In this type of differentiation, the main focus is given to customized services. The best example is Dell computers. There are large numbers of players in computer and laptop/notebook markets in India. But Dell differentiates itself from competitors in terms of customized service. Any customer can go to dell website and customize whole laptop and pc as per his/her requirements. This kind of offerings or strategy helps companies like Dell to build good customer relations and increased customer satisfaction too.
25 | P a g e
11) DIFFERENTIATION THROUGH TECHNOLOGY OR INNOVATION
This is the current trend in differentiation strategies. Large companies especially in telecom, IT and Electronic gadgets are intensively using this differentiating Strategy. Here prime focus is given to Technology advancement and Innovation in products. The best example is Apple. Apple has one of the best interface in Mobile and computer systems and moreover it is very innovative then other competitive products in the same line. This kind of differentiation strategy encourages company to invest big funds into R&D and to innovate frequently to make customers life simpler and Stylish.
26 | P a g e
12) BIBLOGRAPHY
Websites visited: en.wikipedia.org www.bluedart.com www.icmrindia.org/casestudies/catalogue/InternationalMarketing www.internsindia.com Books & Articles: Marketing Management 13th Edition, Philip Kotler Harvard Business Review Article, “Marketing Success through Differentiation–of Anything”, Theodore Levitt
27 | P a g e
doc_562744428.pdf