A business differentiates its product or service from competitors through product positioning. This defines what the USP (unique selling proposition) for the product or service is.
1. Product or service characteristics
What are the characteristics of your product or service that differentiates you from the competition? For example, a company within an industry that requires quick turnaround time, may differentiate its product from the competition through a guaranteed lead time, that is significantly better than the competition.
Are you able to reduce the cost of producing a product or service, and as a result, make price your USP? For example, supermarkets such as Shoprite and Pick and Pay have developed house brands that are marketed as value products; due to reduced marketing and logistics costs these are generally cheaper than branded products within the same category.
3. Quality or luxury
Are you able to create a perception of quality or luxury in the minds of the customer? This is based on perception, and not necessarily reality. For example, in the 2021 JD Power Vehicle Dependability Study, Kia was ranked at 3 for reliability, BMW was ranked at 11, and Mercedes Benz at 16. However, market perception is that BMW and Mercedes Benz are renowned for their build quality and reliability.
4. Product use
Are you able to differentiate your product based on its use? Is your product or service the best fit for its particular application, and do you market it as such? As an example, a company developed a product for the mining industry that allowed for on-site application. This obviated the requirement for costly transport to specialised workshops for similar applications. It was thus able to significantly improve its market share through marketing this benefit, even though there were cheaper products available on the market
Are you able to use the competition as a reference point for differentiation? For example, in the development of the original Lexus, Toyota began with focus group interviews of people driving competitor cars such as BMW 7 series Mercedes Benz S Class, Audi, Volvo and Jaguar, and built a car that incorporated the perceived value provided by each vehicle. As a result, by 2002, Lexus was the best selling luxury car in the USA (its primary market).
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