Chapter -6

SEGMENTATION,
TARGETING,
POSITIONING
&
DIFFERENTIATING
PILLARS OF MARKETING
 Market Segmentation

An organization cannot satisfy the needs and wants of

all consumers.
Segmentation is simply the process of dividing a
particular market into sections, which display similar
characteristics or behaviour.
There are a number of segmentation variables that
allow an organization to divide their market into
homogenous groups.
Market segmentation provides a method to divide or
segment the market into narrow segments (using a
variety of different meaningful variables).
 Segmentation Variables

Social
Demographic Geographic Lifestyles
Segmentation Psychographics segmentation Class Behavioural
Segmentation Segmentatio Segmentation
Segmentation
n
 Demographic Segmentation

Demographics originates from the word demography

which means a study of population. The population
can be divided into age, gender, income, and family
lifecycle amongst other variables.
As people age their needs and wants change, some
organizations develop specific products aimed at
particular age groups for example nappies for babies,
toys for children, clothes for teenagers and so on.
Gender segmentation is commonly used within the
cosmetics, clothing and magazine industry.
 Demographic
Segmentation

Age Gender Income Lifestyle

 Age and Life-Cycle Stage

Age and life cycle segmentation consists of offering

different products or using different marketing
approaches for different age and life-cycle groups.
Marketers must guard against stereotypes when
using this form of segmentation.
While certain age and life cycle groups do behave
similarly, age is often a poor predictor of a persons life
cycle, health, work or family status, needs, and buying
power.
Consumer needs and wants change with age.
Some companies use age and life cycle segmentation,
offering different products or using different marketing
approaches for different age and life-cycle groups.
 Income segmentation is another strategy used
by many organizations.
In today's globally competitive environment
brands are specifically developed and
positioned within particular income segments
in order to maximize turnover.
Products and services are also aimed at
different lifecycle segments.
 Geographic Segmentation

Geographical segmentation divides markets into

different geographical areas.
Marketers use geographic segmentation because
consumers in different areas may display certain
characteristics and behaviours in that particular region .
An area can be divided by the town, the region or the
country.
McDonalds globally, sell burgers aimed at local
markets, for example, burgers are made from lamb in
India rather then beef because of religious issues.
In Mexico more chilli sauce is added and so on.
 Psychographics Segmentation

Although demographic segmentation is useful,

marketers can use alternative segmentation
variables which aim to develop more accurate
profiles of their target segments.
Psychographics segmentation can be broken
down into lifestyle, social class, and
personality characteristics.
 Psychographic
segmentation

Lifestyle Social class Personality

 Lifestyles Segmentation
The Oxford English dictionary defines a lifestyle 'as a way
of life' and lifestyle segmentation aims to examine the way
people live.
Our lifestyle, our every days activities, our interest,
opinions and beliefs on certain issues dictates who we are.
Marketers refer to these as AIOs (Activities, Interest and
Opinions), and our AIOs dictate our everyday behaviour
from where we shop to what we buy.
Marketers develop and aim products/services at
particular lifestyle groups and develop lifestyle profiles on
their target market.
If we understand the lifestyle of a particular group we can
sell them a product/services on the basis that it will enhance
their lifestyle.
 A lifestyle group is a particular segment
defined by the organization that is marketing a
product or service.
This lifestyle segment is labeled because
individual within it display similar
characteristics.
 Personality Characteristics

Products and brands can also be aimed at

particular personalities.
Often marketers try to develop personalities
for their brands and products that mimic that of
their target market.
Ask yourself if Nike or Levis was a person,
what type of person would they be?
 Social Class Segmentation

Divides society into 6 distinct groups based

solely on occupation.
A Professional staff
B Middle management
C1 Junior management
C2 Skilled manual
D Semi-skilled and unskilled workers.
E Those dependent on the state.
 Social class segmentation works on the
assumption that the higher your profession the
more you will earn. Thus the more affluent
lifestyle you will lead.
Marketers use this type of information to sell
products and services based on lifestyle
behaviour, and your profession does have an
impact on the way you behave.
 Behavioural Segmentation

Refers to why people purchase a product or service.

Behavioural segmentation can be broken down into the
benefit a consumer seeks from purchasing a product.
How will the product enhance their overall lifestyle.
When purchasing a computer the benefit sought maybe
of ease of use to the need for speed.
Occasion is another variable.
When should a product be purchased?
Occasion segmentation aims to increase the reason to
buy factor' and thus increase sales.
 Behavioural
Segmentation

Benefit Occasion Usage

 Usage rate divides customers into light,
medium and heavy users.
Heavy users obviously contribute more to
turnover then light or medium users, the
objective of an organization should be to
attract heavy users who will make a greater
contribution to company sales.
 Requirements of segmentation
Before an organization can target a specific
segment accurately it must ask itself a number of
questions.
It is important to evaluate the effectiveness of a
targeting strategy and the viability of the segment,
if this is not done then money will be wasted.
The market which is segmented must meet the
following criteria:
Measurability of segment: Can you measure the
size and growth of the segment. Is the segment
growing?
 Accessibility of segment: Is it easy for you to target and
reach your segment? Can they be reached with basic
communication tools such as radio and TV advertising? If
you cannot target your segment effectively with marketing
communication then it is not viable.
Suitability of segment: Is there enough spending power
within the segment for the company to sustain itself.? Will
spending within the DVD marketing continue?
Action ability of segment: Does the organization have
enough resources to reach their segments?. It is no point in
targeting segments you do not have the resources to cater
for. If you were a car manufacturer the organization would
not concentrate on the affluent and price sensitive market if
they did not have the resources to do so.
 Important reasons why businesses
should attempt to segment their
markets carefully.
Better matching of customer needs
Customer needs differ. Creating separate offers for each segment
makes sense and provides customers with a better solution
Enhanced profits for business
Customers have different disposable income. They are, therefore,
different in how sensitive they are to price. By segmenting markets,
businesses can raise average prices and subsequently enhance profits
Better opportunities for growth
Market segmentation can build sales. For example, customers can be
encouraged to "trade-up" after being introduced to a particular
product with an introductory, lower-priced product
 Retain more customers
Customer circumstances change, for example they grow older, form
families, change jobs or get promoted, change their buying patterns. By
marketing products that appeal to customers at different stages of their life
("life-cycle"), a business can retain customers who might otherwise switch
to competing products and brands
Target marketing communications
Businesses need to deliver their marketing message to a relevant customer
audience. If the target market is too broad, there is a strong risk that (1) the
key customers are missed and (2) the cost of communicating to customers
becomes too high / unprofitable. By segmenting markets, the target
customer can be reached more often and at lower cost
Gain share of the market segment
Unless a business has a strong or leading share of a market, it is unlikely to
be maximizing its profitability. Minor brands suffer from lack of scale
economies in production and marketing, pressures from distributors and
limited space on the shelves. Through careful segmentation and targeting,
businesses can often achieve competitive production and marketing costs
and become the preferred choice of customers and distributors. In other
words, segmentation offers the opportunity for smaller firms to compete
with bigger ones.
 Levels of Market Segmentation

Because buyers have unique needs and wants, each buyer is

potentially a separate market. Ideally, then, a seller might
design a separate marketing program for each buyer.
However, although some companies attempt to serve buyers
individually, many others face larger numbers of smaller
buyers and do not find complete segmentation worthwhile.
Instead, they look for broader classes of buyers who differ
in their product needs or buying responses. Thus, market
segmentation can be carried out at several different levels.
No segmentation (MASS MARKETING),
Complete segmentation ( MICROMARKETING), or
Something in between (SEGMENT MARKETING OR
NICHE MARKETING).
 Mass Marketing

Companies have not always practiced target marketing. In fact, for

most of the 1900s, major consumer products companies held fast to
mass marketingmass producing, mass distributing, and mass
promoting about the same product in about the same way to all
consumers.
Henry Ford epitomized this marketing strategy when he offered the
Model T Ford to all buyers; they could have the car in any color as
long as it is black."
Similarly, Coca-Cola at one time produced only one drink for the
whole market, hoping it would appeal to everyone.
The traditional argument for mass marketing is that it creates the
largest potential market, which leads to the lowest costs, which in
turn can translate into either lower prices or higher margins.
However, many factors now make mass marketing more difficult.
The proliferation of distribution channels and advertising media has
also made it difficult to practice "one-size-fits-all" marketing.
 Segment Marketing

A company that practices segment marketing isolates broad

segments that make up a market and adapts its offers to more closely
match the needs of one or more segments.
Thus, Marriott markets to a variety of segmentsbusiness travelers,
families, and otherswith packages adapted to their varying needs.
Segment marketing offers several benefits over mass marketing.
The company can market more efficiently, targeting its products or
services, channels, and communications programs toward only
consumers that it can serve best and most profitably.
The company can also market more effectively by fine-tuning its
products, prices, and programs to the needs of carefully defined
segments.
The company may face fewer competitors if fewer competitors are
focusing on this market segment.
 Niche Marketing

Market segments are normally large, identifiable groups

within a marketfor example, luxury car buyers,
performance car buyers, utility car buyers, and economy car
buyers.
Niche marketing focuses on subgroups within these
segments. A niche is a more narrowly defined group,
usually identified by dividing a segment into sub segments
or by defining a group with a distinctive set of traits who
may seek a special combination of benefits.
Whereas segments are fairly large and normally attract
several competitors, niches are smaller and normally attract
only one or a few competitors. Niche marketers presumably
understand their niches' needs so well that their customers
willingly pay a price premium.
 Targeting.
Targeting is the second stage of
the SEGMENT "TARGET" POSITION (STP)
process.
After the market has been separated into its
segments, the marketer will select a segment or
series of segments and 'target' it/them.
 Segment 1

Segment 2

Single segment with single product

Segment 3
Supplier

Segment 4

Segment 5

Segment 6
 The first is the single segment with a single
product. In other word, the marketer targets a
single product offering at a single segment in a
market with many segments.
 Segment 1

Segment 2

Segment 3
One product for all segments
Supplier

Segment 4

Segment 5

Segment 6
 Secondly the marketer could ignore the
differences in the segments, and choose to aim
a single product at all segments i.e. the whole
market.
This is typical in 'mass marketing' or where
differentiation is less important than cost. An
example of this is the approach taken by
budget airlines such as Go/
 SEGMENT 1

SEGMENT 2
Brand A
Brand B
Brand C SEGMENT 3
SUPPLIER Brand D
Brand E
Brand F SEGMENT 4

SEGMENT 5

SEGMENT 6
 Finally there is a multi-segment approach.
Here a marketer will target a variety of
different segments with a series of
differentiated products.
This is typical in the motor industry. Here
there are a variety of products such as diesel,
four-wheel-drive, sports saloons, and so on.
Targeting is to make a thing or group of things a
target, to select it or them to be acted upon.

Targeted advertising , to select a demographic

or other group of people to advertise to, and
create advertisements appropriately
Behavioural targeting , in marketing
 Positioning
In marketing positioning has come to mean the process by
which marketers try to create an image or identity in the
minds of their target market for its product, brand or
organization. It is the 'relative competitive comparison' their
product occupies in a given market as perceived by the
target market.
Re-positioning involves changing the identity of a product,
relative to the identity of competing products, in the
collective minds of the target market.
De-positioning involves attempting to change the identity
of competing products, relative to the identity of your own
product, in the collective minds of the target market.
 "A product's position is how potential buyers
see the product", and is expressed relative to
the position of competitors.
Positioning is a concept in marketing which
was first popularized by Al Ries and Jack
Trout in their bestseller book " Positioning - a
battle for your mind".
 The product positioning process
involves:
Defining the market in which the product or brand will
compete (who the relevant buyers are)
Identifying the attributes (also called dimensions) that
define the product 'space'
Collecting information from a sample of customers about
their perceptions of each product on the relevant attributes
Determine each product's share of mind
Determine each product's current location in the product
space
Determine the target market's preferred combination of
attributes (referred to as an ideal vector) Examine the fit
between:
The position of your product
The position of the ideal vector
Position.
 Positioning concepts

More generally, there are three types of positioning concepts:

Functional positions
Solve problems
Provide benefits to customers
Get favorable perception by investors and lenders
Symbolic positions
Self-image enhancement
Ego identification
Belongingness and social meaningfulness
Affective fulfillment
Experiential positions
Provide sensory stimulation
Provide cognitive stimulation
 Positioning may refer to:
Positioning is creating an identity in the minds of a
target market.
Positioning is all about 'perception'. As perception
differs from person to person, so do the results of the
positioning map e.g what you perceive as quality, value
for money, etc, is different to my perception. However,
there will be similarities.
Products or services are 'mapped' together on a
'positioning map'. This allows them to be compared
and contrasted in relation to each other. This is the main
strength of this tool. Marketers decide upon a
competitive position which enables them to distinguish
their own products from the offerings of their
competition (hence the term positioning strategy).
 POSITIONING MAP

HIGH

PPRODUCT
HIGH LOW

LOW
 The marketer would draw out the map and decide upon
a label for each axis. They could be price (variable one)
and quality (variable two), or Comfort (variable one)
and price (variable two). The individual products are
then mapped out next to each other Any gaps could be
regarded as possible areas for new products.
The term 'positioning' refers to the consumer's
perception of a product or service in relation to its
competitors. You need to ask yourself, what is the
position of the product in the mind of the consumer?
 A six-step question framework for
successful positioning:

What position do you currently own?

What position do you want to own?
Whom you have to defeat to own the position
you want.
Do you have the resources to do it?
Can you persist until you get there?
Are your tactics supporting the positioning
objective you set?
 Repositioning a company

In volatile markets, it can be necessary - even urgent -

to reposition an entire company, rather than just a
product line or brand.
Repositioning a company involves more than a
marketing challenge.
It involves making hard decisions about how a market
is shifting and how a firm's competitors will react.
Often these decisions must be made without the benefit
of sufficient information, simply because the definition
of "volatility" is that change becomes difficult or
impossible to predict.
 Positioning for Competitive
Advantage
Once a company has decided which segments of the market
it will enter, it must decide what positions it wants to
occupy in those segments.
A product's position is the way the product is defined by
consumers on important attributesthe place the product
occupies in consumers' minds relative to competing
products. Positioning involves implanting the brand's
unique benefits and differentiation in customers' minds.
Thus, Tide is positioned as a powerful, all-purpose family
detergent; In the automobile market, Toyota and Subaru are
positioned on economy, Mercedes and Cadillac on luxury
Consumers are overloaded with information about products
and services.
 They cannot re evaluate products every time they make a buying
decision.
To simplify the buying process, consumers organize products into
categoriesthey "position" products, services, and companies in
their minds. A product's position is the complex set of perceptions,
impressions, and feelings that consumers have for the product
compared with competing products.
Consumers position products with or without the help of marketers.
But marketers do not want to leave their products' positions to
chance.
They must plan positions that will give their products the greatest
advantage in selected target markets, and they must design
marketing mixes to create these planned positions.
 Choosing a Positioning Strategy

Some firms find it easy to choose their positioning strategy. For

example, a firm well known for quality in certain segments will go
for this position in a new segment if there are enough buyers
seeking quality.
But in many cases, two or more firms will go after the same
position. Then, each will have to find other ways to set itself apart.
Each firm must differentiate its offer by building a unique bundle of
benefits those appeals to a substantial group within the segment.
The positioning task consists of three steps: identifying a set of
possible competitive advantages upon which to build a position,
choosing the right competitive advantages, and selecting an overall
positioning strategy.
The company must then effectively communicate and deliver the
chosen position to the market.
 Identifying Possible Competitive
Advantages
The key to winning and keeping customers is to
understand their needs and buying processes better than
competitors do and to deliver more value.
To the extent that a company can position itself as
providing superior value to selected target markets it
gains competitive advantage.
But solid positions cannot be built on empty promises.
If a company positions its product as offering the best
quality and service, it must then deliver the promised
quality and service.
Thus, positioning begins with actually differentiating
the company's marketing offer so that it will give
consumers more value than competitors' offers do.
 To find points of differentiation, marketers must think through the
customer's entire experience with the company's product or service.
An alert company can find ways to differentiate itself at every point
where it comes in contact with customers. In what specific ways can
a company differentiate its offer from those of competitors?
A company or market offer can be differentiated along the lines of
product, services, channels, people, or image.
Companies can gain a strong competitive advantage through people
differentiationhiring and training better people than their
competitors do.
Thus, Disney people are known to be friendly and upbeat. Singapore
Airlines enjoys an excellent reputation largely because of the grace
of its flight attendants.
 Choosing the Right Competitive
Advantages
Suppose a company is fortunate enough to
discover several potential competitive
advantages.
It now must choose the ones on which it will
build its positioning strategy. It must decide
how many differences to promote and which
ones.
How Many Differences to Promote?
Many marketers think that companies should
aggressively promote only one benefit to the
target market. Each brand should pick an attribute
and tout itself as "number one" on that attribute.
Thus, Crest toothpaste consistently promotes its
anti cavity protection.
A company that hammers away at one of these
positions and consistently delivers on it probably
will become best known and remembered for it.
 Other marketers think that companies should position themselves on
more than one differentiating factor.
This may be necessary if two or more firms are claiming to be the
best on the same attribute.
Today, in a time when the mass market is fragmenting into many
small segments, companies are trying to broaden their positioning
strategies to appeal to more segments.
In general, a company needs to avoid three major positioning errors.
The first is under positioningfailing to ever really position the
company at all.
Some companies discover that buyers have only a
vague idea of the company or that they do not really know anything
special about it.
The second error is over positioninggiving buyers too narrow a
picture of the company.
 Which Differences to Promote?
Not all brand differences are meaningful or worthwhile;
not every difference makes a good
differentiator.
Each difference has the potential to create company
costs as well as customer
benefits.
Therefore, the company must carefully select the ways
in which it will distinguish itself from competitors.
A difference is worth establishing to the extent that it
satisfies the following
criteria:
 Important: The difference delivers a highly valued
benefit to target buyers.
Distinctive: Competitors do not offer the difference, or the
company can offer it in a more distinctive way.
Superior: The difference is superior to other ways that
customers might obtain the same benefit.
Communicable: The difference is communicable and
visible to buyers.
Preemptive: Competitors cannot easily copy the
difference.
Affordable: Buyers can afford to pay for the difference.
Profitable: The company can introduce the difference
profitably.
Many companies have introduced differentiations that failed
one or more of these tests.
 Selecting an Overall Positioning
Strategy
Consumers typically choose products and services that give
them the greatest value.
Thus, marketers want to position their brands on the key
benefits that they offer relative to competing brands.
The full positioning of a brand is called the brand's value
propositionthe full mix of benefits upon which the brand
is positioned.
It is the answer to the customer's question "Why should I
buy your brand?"
Volvo's value proposition hinges on safety but also includes
reliability, roominess, and styling, all for a price that is
higher than average but seems fair for this mix of benefits.
 Communicating and Delivering the
Chosen Position
Once it has chosen a position, the company
must take strong steps to deliver and
communicate the desired position to target
consumers. All the company's marketing mix
efforts must support the positioning strategy.
Positioning the company calls for concrete
action, not just talk. If the
company decides to build a position on better
quality and service, it must first deliver that
position.
 Designing the marketing mixproduct, price, place,
and promotionessentially involves working out the
tactical details of the positioning strategy.
Thus, a firm that seizes on a "for more" position knows
that it must produce high-quality products, charge a
high price, distribute through high quality dealers, and
advertise in high-quality media.
It must hire and train more service people, find retailers
who have a good reputation for service, and develop
sales and advertising messages that broadcast its
superior service.
 This is the only way to build a consistent and believable "more for
more" position. Companies often find it easier to come up with a
good positioning strategy than to implement it. Establishing a
position or changing one usually takes a long time.
In contrast, positions that have taken years to build can quickly be
lost. Once a company has built the desired position, it must take care
to maintain the position through consistent performance and
communication.
It must closely monitor and adapt the position over time to match
changes in consumer needs and competitors' strategies.
However, the company should avoid abrupt changes that might
confuse consumers. Instead, a product's position should evolve
gradually as it adapts to the ever-changing marketing environment.
 Undifferentiated Marketing

Using an undifferentiated marketing (or mass-marketing) strategy, a

firm might decide to ignore market segment differences and go to
the whole market with one offer. This mass-marketing strategy
focuses on what is common in the needs of consumers rather than on
what is different.
The company designs a product and a marketing program that will
appeal to the largest number of buyers. It relies on mass distribution
and mass advertising, and it aims to give the product a superior
image in people's minds.
As noted earlier in the chapter, most modern marketers have strong
doubts about this strategy. Difficulties arise in developing a product
or brand that will satisfy all consumers. Moreover, mass marketers
often have trouble competing with more focused firms that do a
better job of satisfying the needs of specific segments and niches.
 Differentiated Marketing

Using a differentiated marketing strategy, a firm decides to

target several market segments or niches and designs
separate offers for each. General Motors tries to produce a
car for every "purse, purpose, and personality."
Nike offers athletic shoes for a dozen or more different
sports, from running, fencing, and aerobics to bicycling and
baseball. By offering product and marketing variations,
these companies hope for higher sales and a stronger
position within each market segment.
Developing a stronger position within several segments
creates more total sales than undifferentiated marketing
across all segments. Procter & Gamble gets more total
market share with eight brands of laundry detergent than it
could with only one. But differentiated marketing also
increases the costs of doing business.
 A firm usually finds it more expensive to develop and
produce, say, 10 units of 10 different products than 100
units of one product.
Developing separate marketing plans for the separate
segments requires extra marketing research,
forecasting, sales analysis, promotion planning, and
channel management.
Trying to reach different market segments
with different advertising increases promotion costs.
Thus, the company must weigh increased
sales against increased costs when deciding on a
differentiated marketing strategy.
 Concentrated Marketing

A third market-coverage strategy, concentrated marketing, is

especially appealing when company resources are limited.
Instead of going after a small share of a large market, the
firm goes after a large share of one or a few segments or
niches.
Today, the low cost of setting up shop on the Internet makes
it even more profitable to serve seemingly minuscule
niches.
Concentrated marketing provides an excellent way for small
new businesses to get a foothold against larger, more
resourceful competitors.
Through concentrated marketing, firms achieve strong
market positions in the segments or niches they serve
because of their greater knowledge of the segments' needs
and the special reputations they acquire.
 They also enjoy many operating economies
because of specialization in production,
distribution, and promotion.
If the segment is well chosen, firms can earn a
high rate of return on their investments.
At the same time, concentrated marketing
involves higher-than-normal risks.
The particular market segment can turn sour. Or
larger competitors may decide to enter the same
segment.
 Differentiation
In marketing , product differentiation is the
process of distinguishing the differences of a
product or offering from others, to make it
more attractive to a particular target market.
This involves differentiating it from
competitors products as well as one's own
product offerings.
 Differentiation is a source of competitive advantage.
Although research in a niche market may result in changing
your product in order to improve differentiation, the
changes themselves are not differentiation.
Marketing or product differentiation is the process of
describing the differences between products or services, or
the resulting list of differences.
This is done in order to demonstrate the unique aspects of
your product and create a sense of value.
Marketing textbooks are firm on the point that any
differentiation must be valued by buyers .The term unique
selling proposition refers to advertising to communicate a
product's differentiation.
 Differentiation is due to buyers perceiving a difference,
hence causes of differentiation may be functional
aspects of the product or service, how it is distributed
and marketed, or who buys it. The major sources of
product differentiation are as follows.
Differences in quality which are usually accompanied
by differences in price
Differences in functional features or design
Ignorance of buyers regarding the essential
characteristics and qualities of goods they are
purchasing
Sales promotion activities of sellers and, in particular,
advertising
Differences in availability (e.g. timing and location).
 Differentiation primarily impacts performance
through reducing directness of competition: As
the product becomes more different,
categorization becomes more difficult and
hence draws fewer comparisons with its
competition.
A successful product differentiation strategy
will move your product from competing based
primarily on price to competing on non-price
factors (such as product characteristics,
distribution strategy, or promotional variables).
 In business terms, to differentiate means to create
a benefit that customers perceive as being of
greater value to them than what they can get
elsewhere.
It's not enough for you to be different--a potential
customer has to take note of the difference and
must feel that the difference somehow fits their
need better. (Other words that mean virtually the
same thing:
Competitive Advantage; Unique Selling
Proposition; or Value Proposition.)
 VARIOUS METHODS OF
DIFFERENTIATING
Differentiation

Focus Product/ Customer

Differentiation Service Service
Price Differentiation
Differentiation
Differentiation
 Price Differentiation

Differentiating on price is probably the most common

and easily understood method.. On the one hand,
potential customers might expect a lower price from
you than from your larger competition because they
perceive you as having less overhead, etc.
On the other hand, cheaper prices can evoke
perceptions of lower quality, a less-stable business, etc.
And if you compete on price against competitors with
deeper pockets, you can price yourself right into
bankruptcy.
Be creative with this differentiator by competing on
something other than straight price. For example, you
might offer:
 More value - offer more products or services
for the same price.
Freebies - accessories, companion products,
free upgrades, and coupons for future
purchases.
Free shipping, etc. - convenience sells,
especially when it is free!
Discounts - includes offering regular sales,
coupons, etc. (see cautions above)
 Focus Differentiation

For Solo Entrepreneurs, this is the most important

method of differentiation, and in many ways, the
easiest. Why? Because as a Solo Entrepreneur, you
simply can't be everything to everybody, so 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.
 Customer specialization - be very specific about what
characteristics your customers will have for example, racing
bicycle enthusiasts or companies with a spiritual
conscience.
Customer relationships - know customers really well, form
partnerships with them, and get them to speak for you!
Affinity relationships - associate your product/service with
a well-known person or organization.
One-stop shopping - offer everything your target market
needs, in your area of expertise.
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.
 Product/Service Offering
Differentiation
How much you are able to differentiate your product or
service offering will vary based on what type of
business you are in. For instance, if you are in a highly
regulated business, your options may be limited.
Explore a totally new market or type of product or
service, however, and the possibilities abound. The key
to successful differentiation in this category, again, is to
know your customers, really, really well. Talk to them
often, and you will know what they need most and be
able to offer it, long before your competitors know
what is happening. For example, your product or
service could stand out in one of these ways:
 Quality - create a product or service that is
exceptional in one or more ways. Examples: Lasts
longer --Better --Easier to use --Safer
New/First - be the first one to offer something in
your location/field.
Features/Options - offer lots of choices, unusual
combinations, or solve a problem for a customer
in a way no one else does.
Customization - as a Solo Entrepreneur, you may
be able to more easily handle special orders than
big, mass-market competitors.
 Customer Service Differentiation

Have you noticed how customer service seems to be out of

vogue these days? This situation makes excellent customer
service a great opportunity for differentiation and another
natural advantage for Solo Entrepreneurs that already know
what s important to their customers. Build your reputation
on making customers feel really good about doing business
with you. Works great with referral marketing, too.
Examples:
Deliver Fast - next day, or one-hour--make it faster than
customers think possible.
Unique channel - offer a service over the phone or Internet
instead of in person or in their office rather than yours.
 Service-delight customers! - it may seem expensive to
offer exceptional service--but it pays off in word-of-
mouth advertising.
Before/during/after-sales support - provide technical or
other support to customers using your product. You
might use joint ventures to provide that support--but
customers will perceive it as being from you!
Guarantee/warranty - offer 100% money-back, or free
replacement parts.
YOU - offer yourself, your unique blend of talents and
skills, to attract customers. Make sure they get access to
you, too!
 Keys to Successful Differentiation:

Know your customers, really, really well.

Pick a blend of differentiation methods that, in the
eyes of your customers, truly sets you apart.
Talk about your differentiation in terms of
customer benefits.
Tell everyone about what differentiates you--
often.
Keep your differentiation fresh by listening for
changing customer needs.
Making A Business Stand Out From
Its Competitors
Business differentiation is a marketing strategy used by
many successful entrepreneurs. Some business experts
believe it is one of the most important and effective
marketing tools available to small business owners and
entrepreneurs today because of its flexibility, ease of
use and general low implementation cost. Also called
positioning, business differentiation is what sets a
business apart from the others in its field, geographical
area, market or demographic. Essentially, it is
(hopefully) what a client or customer would say when
asked, "What's so special about business XYZ?"
 Why Business Differentiation Is
Important
Without business differentiation, all businesses selling
the same product or service would be challenged to
compete against one another, as the market's perception
of the business can make or break an entrepreneur. The
goal is to discover a niche in the marketplace that:
is large enough to make money;
small enough to position the business in a different light
than the others in the market or area;
is well suited to the needs, skills, interests and strengths
of the business, and;
fills a need in the marketplace.
 Ways To Create Business
Differentiation
Of the business differentiation list that follows,
not all will fit any given entrepreneurial venture-
and that's a good thing.
Every business cannot compete on the same level,
in the same way, and therefore why there are so
many business differentiation methods and tactics
to choose from.
A marketing plan will be very helpful in this
business differentiation decision making process,
as it provides all of the business strategy needed.
 This list is not comprehensive, but it is a good starting point. Do
note that it is impossible for any one business to use all of the
business differentiation tactics listed below, as it will muddy the
message. This is a situation where less is most definitely more.
Quality
Service
Price
Perceived Value
Durability
Convenience
Warranty
Financing
Range of Products/Services Offered
Accessibility
Production Method(s)
Reliability
Familiarity
Credentialing