BROAD SCOPE DIFFERENTIATION: Appealing to what is in common between different customers (McDonalds, Honda, Gillette) FOCUSED DIFFERENTIATION: Appealing to what distinguishes. different[r]
(1)Differentiation Advantage
Differentiation Advantage
•
The nature of differentiation
•
Differentiation and segmentation
•
Analyzing differentiation: the demand side
•
Analyzing differentiation: the supply side
•
Bringing it all together: value chain analysis
(2)The Nature of Differentiation
The Nature of Differentiation
TOTAL CUSTOMER RESPONSIVENESS
Differentiation not just about the product, it embraces the whole
relationship between the supplier and the customer.
INTANGIBLE DIFFERENTATION
Unobservable and subjective characteristics relating to image, status, exclusivity, identity
TANGIBLE DIFFERENTATION
Observable product characteristics:
• size, color, materials, etc.
• performance
• packaging
• complementary services
DEFINITION: Providing something unique that is valuable to the
buyer beyond simply offering a low price (M Porter)
(3)Differentiation and Segmentation
Differentiation and Segmentation
DOES DIFFERENTIATION IMPLY SEGMENTATION?
Not necessarily, depends upon the differentiation strategy:
BROAD SCOPE DIFFERENTIATION: Appealing to what is in common between different customers (McDonalds, Honda, Gillette) FOCUSED DIFFERENTIATION: Appealing to what distinguishes
different customer groups (MTV Harley-Davidson, Ralph Lauren)
DIFFERENTIATION: is concerned with how a firm distinguishes its offerings from those of its competitors (i.e How the firm competes)
SEGMENTATION: is concerned with which customers, needs,
(4)Differentiation vs Cost Leadership as a
Basis for Competitive Advantage
Basis for Competitive Advantage
Highest return on equity among top 200 US companies, 2002
(%) (%)
Colgate Palmolive 367.8 Gillette 53.8 Caremark Rx 303.2 H.J Heinz 48.5 American Standard 161.4 Pfizer 45.7 Yum Brands 98.1 Dell Computer 43.0
Kellogg 80.5 TJX 41.3
Anheuser-Busch 63.4 Oracle 36.4
Nextel Communications 58.3 PepsiCo 35.6
Sara Lee 58.0 3M 32.9
Altria Group 57.0 Eli Lilly 32.7
Wyeth 54.5 Sysco 31.9
(5)Differentiation and the Product Life Cycle
Differentiation and the Product Life Cycle
New packages of hardware and software introduced
SYSTEM Augmentation:
repackaging of hardware and
software
PRODUCTS & SERVICES
Decommoditization
COMMODITY
PRODUCTS & SERVICES
Commoditization Desystematization
(6)Analyzing the Demand Side
Analyzing the Demand Side
Techniques for analyzing product attributes and
positioning:
•
Multidimensional Scaling
•
Conjoint Analysis
(7)Differentiation in Pain Relievers:
Multidimensional Scaling of Competing
Products in the U.S.
Differentiation in Pain Relievers:
Multidimensional Scaling of Competing
Products in the U.S.
High
Low
Low High
EFFECTIVENESS
GENTLENESS Tylenol
Bufferin
Excedrin Bayer
Anacin Private