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).
 Demographic Segmentation
Segmentation Variables
 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
Age Segmentation
 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
Lifestyle segmentation
 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
Benefit
 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 marketing
mass 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

HIG
H

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 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