Differentiation

Which came first – the segmentation or the differentiation?

One can argue that differentiation and segmentation are two sides of the same coin. That is, segmentation can be driven by the differentiation of the product and its features and benefits, or that differentiation is a result of the segment one targets. First, let’s define our terms.

Webster’s has several definitions but the one I like the best is: “Constitute a difference that distinguishes”. Another definition in the same list “To express the distinguishing quality of”. Marketers use the concept of differentiation to separate the features, benefits and characteristics of their product against another product or solution that the customer may be familiar with. What becomes important in this exercise is to create distinctions with a difference.

A marketer needs to identify and distinguish key features, benefits, characteristics or other attributes of his product or service that are different from another on the market, and explain why the difference is important to the customer. In this manner, it also helps to know what the customer considers to be important. If I manufacture tires and compete with the larger tire manufacturers and the only difference between my tires and the competitions tires is the fact that mine are red, whereas the competitors only make black tires, then I am placing a big bet on the hopes (or knowledge) that consumers value red tires highly. Of course in this case I face another problem with differentiation – barriers to entry. Large tire manufacturers can probably quickly copy a color advantage, so if this is a differentiation it probably won’t exist as a distinction for long.

There are at least four things that matter in differentiation, based on the above discussion and the definition:
- there must be a difference that can be identified clearly
- that difference must be sustainable
- the differentiation points that competitors have already established
- there must be something to differentiate against

Let’s start with the last one first. Ries and Trout in their book “Marketing Warfare” (read it if you haven’t) discuss the way customers distinguish and remember products and services. Generally speaking, when we as consumers evaluate a product or service, we compare a new product with a known product to determine if we consider that new product “better”. To differentiate a product, a marketer must differentiate against something – a competing product, another solution to the problem, a concept or idea. Differentiation does not exist in a vacuum, except possibly in Monty Python skits where one can simply claim a product is “better”. What a marketer chooses as his differentiation comparison says a lot about what the product. For example, if I market tires and I claim mine are longer lasting than a major competitor, I am not necessarily claiming to be less expensive or more stylish. Those differentiation points may already be held by another competitor. My differentiation points must support the concepts and ideas I am trying to communicate about my product.

In the same example, if I market my tires as the safest on the highway, but my key differentiation is that my tires come in many different colors, I am not reinforcing my best competitive point unless I can prove my tires are safer than other manufacturers’ tires. Often, the differentiation points I can use are limited by the claims and marketing of my competitors. Generally speaking, there is almost always a firm that has claimed the lowest cost mantle in any market, and a product that has differentiated itself as the “status” symbol for a market. In automobiles for example, Hyundai owns the low cost differentiator, while BMW or Mercedes own the “status” differentiator. In fact, one can place differentiator labels on a number of automobile brands – “safety” for Volvo or “reliable” for Honda and Toyota. In fact, this is probably one of the biggest weaknesses of US automobile marketing – what do the major labels stand for? Ford was trying to differentiate on quality (Quality is Job One) for a while, but that has gone by the wayside. I can’t think of a label or differentiation point for the US car companies. Luckily their products – Ford Explorer or Chevy Corvette can be differentiated.