Creating a Differential Advantage
Although skills and resources are the sources of competitive advantage, they are translated into a differential advantage only when the customer perceives that the firm is providing value above that of competition.
The creation of differential advantage, then, comes with the marrying of skills and resources with key attributes (choice criteria) that customers are looking for in a product offering.
However it should be recognized that the distinguishing competing attributes (attributes on the basis of which differentiation can be made) in the market are not always the most important ones. For example, if customers were asked to rank safety, punctuality and on-board service in importance when flying, safety would be ranked on top. But when choosing an airline, safety would rank low because most airlines are assigned to be safe. Therefore, airlines look to less important ways of differentiating their offering (on board services). A differential advantage can be created with any aspect of the marketing mix. The key to deciding whether improving an aspect of marketing is worthwhile, is to know if the potential benefit provides value to the customer.
Product performance can be enhanced by such devices as raising speed, comfort, safety levels, capacity and ease of use or improving taste or smell. Durability, reliability, styling, capacity to upgrade, provision of guarantee, giving technical assistance, helping in installation etc. can help in differentiating a product from that of the competitor’s.
Wide distribution coverage and careful selection of distributor locations can provide convenient purchasing points for customers. Quick and reliable delivery, providing distribution with support in the form of training and financial help, computerized recording helps in differentiating a company’s offerings from those of competitor. Building exclusive channel partnerships and entering into long term contracts with these partners can also prove to be beneficial to the company in getting better customer feedback.
A differential advantage can be achieved by the creative use of advertising. Advertising can aid differentiation by creating a stronger brand personality than competitive brands. Using more creative sales promotional methods or simply spending more on sales incentives can give direct added value to customers.
By engaging in cooperative promotion with distributors, producers can lower their costs and raise their goodwill. When products are similar, a well trained sales force can provide superior problem solving skills for their customers. Dual selling whereby a producer provides sales force assistance to distributors can lower latter’s cost and increase sales.
Fast, accurate quotes can lower customers’ costs by making transactions more efficient. Free demonstrations and free trial arrangements can reduce the risk of purchase for customers. Superior complaint handling procedures can lower customer costs by speeding up the process and reduce inconvenience that can accompany it.
Using low price to gain differential advantage can fail unless the firm enjoys cost advantage and has resources to fight a price war. Credit facilities and low interest loans are indirectly low prices. A high price can be used to do premium positioning. Where a brand has distinct product, promotional and distribution advantage, a premium price provides consistency with the marketing mix.