Differentiation strategies are attractive whenever buyers’ needs and preferences
are too diverse to be fully satisfied by a standardized product or by
sellers with identical capabilities. A company attempting to succeed through
differentiation must study buyers’ needs and behavior carefully to learn what
buyers consider important, what they think has value, and what they are willing
to pay for. Then the company has to incorporate buyer-desired attributes
into its product or service offering that will clearly set it apart from rivals.
Competitive advantage results once a sufficient number of buyers become strongly
attached to the differentiated attributes.
Successful differentiation allows a firm to:
- Command a premium price for its product, and/or
- Increase unit sales (because additional buyers are won over by the differentiating features), and / or
- Gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products).