Product Differentiation

By VIGNESH.S 215112041 MBA 1st Year NIT Trichy.

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INTRODUCTION: The recent era of marketing is filled with large number of players in every segment leading to the heavy competition in the market. So every player has to come up with some differentiation in their products to survive in the market, this has led to the formation of the concept called PRODUCT DIFFERENTIATION. Product differentiation can define as the process carried out by the companies to obtain a competitive advantage over other companies in the market. It can also be defined as the process of making your marketing mix uniquely different from other products or services competing for the same target audience. This differentiation may be in any of the 5P's of Marketing (product, place, price, promotion, people). DIFFERENTIATION: To be branded products must be differentiated. Physical products vary in their potential for differentiation. At one extreme, we find products that allow little variation: chicken, aspirin, and steel. Yet even here some differentiation is possible: Venkys chicken, Bayer asprin and Tata steel have carved out distinct identities in their categories. Procter & Gamble makes Pantene, Head & Shoulders, Rejoice shampoos each with a separate brand identity. At the other end are products capable of high differentiation such as automobiles, commercial buildings, furnitures. Here the seller faces an abundance of differentiation possibilities including form, features, customization, performance quality, conformance quality, durability, reliablity, repairability and style. Design has become an increasingly important means of differentiation. In service differentiation is often achieved through use of technology and by offering value-added services. Eg: BLUE DART: Blue Dart, a leading player in the courier service industry in India, has become an important part of the supply chain of many companies by providing integrated services. In order to augment services the company uses several soft wares that enable clients to track and monitor shipment status these include cosmat II, trackdart, maildart, internetdart, packtrack, shoptrack and imagedart. The company also provides economical packaging those faciliates customers sending documents at a price that includes door to door delivery service within India. The company has a fleet of aircrafts to provide cargo services a ground fleet of vehicles, large warehouse space and bonded warehouses in metro cities. The company also provides advisory services to clients to develop solutions and distribution issues.

OTIS ELEVATOR COMPANY: At a typical bank of elevators in an office building lobby, you press the "up" button and take the first elevator that comes, with no idea how many stops there will be until you get to your floor. Now Otis has developed a "smart" elevator. You key in your floor on a centralized panel. The panel tells you which elevator is going to take you to your floor. Your elevator takes you right to your floor and races back to the lobby. With this simple change, Otis has managed to turn every elevator into an
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express. This remarkable differentiator means a speedier ride and less groaning and sighing by riders, but it also has big benefits for builders. Buildings need fewer elevators for a given density of people, so builders can use the extra space for people rather than people conveyers[1]. DIFFERENTIATION STRATEGIES: Before developing the differentiation strategy marketers should have the answer to these questions:

Is my brand the first in the category to claim this differentiating idea? If one of your competitors already owns that positioning your best bet is explore a different avenue. Will my company be able and willing to deliver on that competitive advantage over a long period of time? Brand building takes a long time, consistency and resources to build. If management is not willing to allocate the necessary resources (which vary depending on the industry and level of competition) then your strategy will die in its infant stages. Does my differentiation idea translate into a meaningful benefit for the consumer? If the consumer is not willing to pay for it then you have to start from scratch[2].

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).

There are three types of product differentiation: 1. Simple: based on a variety of characteristics 2. Horizontal: based on a single characteristic but consumers are not clear on quality 3. Vertical: based on a single characteristic and consumers are clear on its quality MARKETING MIX DIFFERENTIATION: Product / Service Differentiation Place Differentiation Price Differentiation Promotion Differentiation People Differentiation

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PRODUCT DIFFERENTIATION: FORM: Many products can be differentiated in formthe size, shape, or physical structure of a product. Consider the many possible forms taken by products such as aspirin. Although aspirin is essentially a commodity, it can be differentiated by dosage size, shape, color, coating, or action time. Few examples of companies which came out with products differentiated in terms of form: POWER SOAPS: When all the soap manufacturing companies in India were going with the regular rectangular shapes power soaps was the first to manufacture soaps in different shapes like Nature Power Papaya soaps in the shape of papaya.

SONY: Recently Sony came with size zero concept where they differentiated their products by means of size. TVS: TVS motors introduced scooty with the concept of TVS99 where their product scooty is available in 99 shades of colour. Here product differentiation is brought in terms of colour.

FEATURES: Most products can be offered with varying features that supplements its basic function. A company can identify and select appropriate new features by surveying recent buyers and then calculating customer value versus company cost for each potential feature. The company should also consider how many people want each feature, how long it would take to introduce each feature, and whether competitors could easily copy the feature. Companies must also think in terms of feature bundles or packages. Auto companies often manufacture cars at several "trim levels." This lowers manufacturing and inventory costs. Each company must decide whether to offer feature customization at a higher cost or a few standard packages at a lower cost. Eg:

HIMALAYA: They came up with the concept of 100% natural with natural herbs. No chemicals present and they also priced higher than their competitors. MICROMAX: Micromax introduced a model named A85, in which they differentiated their product b y means of introducing gesture controls. NOKIA: NOKIA recently launched mobile phones having high clarity cameras named NOKIA PURE VIEW, which had 48 mega pixel cameras.

PERFORMANCE QUALITY: Most products are established at one of four performance levels: low, average, high, or superior. Performance quality is the level at which the product's primary characteristics operate. Firms should not necessarily design the highest performance level possible. The manufacturer must design a performance
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level appropriate to the target market and competitors' performance levels. A company must also manage performance quality through time. Continuously improving the product can produce the high returns and market share. Lowering quality in an attempt to cut costs often has dire consequences. Eg: BATA: It is a Switzerland based shoe manufacturing company. They entered Indian market and differentiated their product by showing the quality. They dont have any fancy range shoes, inspite they manufactured shoes with high quality.

CONFORMANCE QUALITY: Buyers expect products to have a high conformance quality, which is the degree to which all the produced units are identical and meet the promised specifications. Suppose a Porsche 944 is designed to accelerate to 60 miles per hour within 10 seconds. If every Porsche 944 coming off the assembly line does this, the model is said to have high conformance quality. The problem with low conformance quality is that the product will disappoint some buyers. Eg: SARAVANA BHAVAN: Chennai based multinational company which continuously provides quality foods to their consumers. Customers enter the hotel expecting a good food and clean environment and the company continuously satisfy its consumers. MARUTHI SWIFT: It is the first fully Indian engineered car in the Indian market. Before its entry it is believed that only foreign based engine designs are good but with its entry swift proved its quality and promised to fulfill its expectations. DURABILITY Durability, a measure of the product's expected operating life under natural or stressful conditions, is a valued attribute for certain products. Buyers will generally pay more for vehicles and kitchen appliances that have a reputation for being long lasting. However, this rule is subject to some qualifications. The extra price must not be excessive. Furthermore, the product must not be subject to rapid technological obsolescence, as is the case with personal computers and video cameras Eg: AMBUJA CEMENTS:

Ambuja cements are a Maharashtra based company which gain advantage over other companies in the market by highlighting the durability of the product. Their tag line is Giant compressive strength which indirectly induces durability in the consumer minds

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DURABLE CHROME FACTORY: It is one of the leading manufacturers of leather goods. They also have many retail outlets in Chennai. As the name implies they differentiate their product in terms of durability. WOODLANDS: As we all know woodland products are strong and it stands for strength. They are also rough and tough for use. They price their products very high compared to their competitors showcasing the durability.

RELIABILITY: Buyers normally will pay a premium for more reliable products. Reliability is a measure of the probability that a product will not malfunction or fail within a specified time period. Maytag, which manufactures major home appliances, has an outstanding reputation for creating reliable appliances. Eg: GODREJ: Godrej locks have strong reliability among the people. Synonymous with trust, protection and integrity. They implement latest technology and constant innovation. CASTROL: its more than just oil, its Liquid engineering this phrase has been used to make the product reliable among the consumers.

REPAIRABILITY: Repairability is a measure of the ease of fixing a product when it malfunctions or fails. Ideal repairability would exist if users could fix the product themselves with little cost in money or time. Some products include a diagnostic feature that allows service people to correct a problem over the telephone or advise the user how to correct it. Many computer hardware and software companies offer technical support over the phone, or by fax or e-mail[3]. Eg: HERO HONDA: All the bikes manufactured by hero honda are easily repairable. They do not involve many technologies and are easily repairable by local mechanics. They also have wide spread service stations all over the country.

STYLE: Style describes the product's look and feel to the buyer. Car buyers pay a premium for Jaguars because of their extraordinary look. Style has the advantage of creating distinctiveness that is difficult to copy. On the negative side, strong style does not always mean high performance. A car may look sensational but spend a lot of time in the repair shop. Eg: FASTRACK: In Indian market fastrack is only watch manufacturing company which has targeted young people in terms of style. They introduced variety of stylish watches like hiphop, denim, biker, army, sports etc. They introduced style without compromising quality. PUMA: They brought in style to the shoes. They manufactured sports shoes with high interest in style and quality. Shoes are also available in different colour combinations. Because of stylish products they also priced their products high compared to their competitors.

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STATUS: Some companies gain advantage over other companies by obtaining status in the market. They create a brand image in the market and make the consumers to feel pride for holding their products. When a company obtains such a status among the consumers their pricing increases compared to their competitors. Eg: ROLEX: Globally treated as one of the most valuable brand. Regarded as status symbols. Luxury Product. Priced high to maintain exclusivity. Catering to Upper classes, Affluent Consumers. RAYMONDS: It is one of the Indias largest branded fabric and fashion clothing manufacturer. Over the years many competitors entered the market but still Raymonds is maintaining its status among the local customers.

CHALLENGES OF PRODUCT-BASED DIFFERENTIATION: The me-too danger. Product features and characteristics can be easily copied. Your company needs to be one step ahead of the curve and invest in improving and perfecting the product; otherwise it will quickly become obsolete. The lower price danger. Globalization brings a lot of benefits but also many challenges. There is always the threat that a competitor might launch a product with the same features, at a lower price. The demanding consumer danger. Products have shorter life cycles and consumers gravitate towards whats new. In order to remain competitive you need to keep up with the latest trends and technologies, or your target audience will switch to competitive offerings[4].

SERVICES DIFFERENTIATION When the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving their quality. The main service differentiators are: ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair. ORDERING EASE: Ordering ease refers to how easy it is for the customer to place an order with the company. Baxter Healthcare has eased the ordering process by supplying hospitals with computer terminals through which they send orders directly to Baxter. Many banks now provide home banking software to help customers get information and do transactions more efficiently. Consumers are now able to order and receive groceries without going to the supermarket. Eg: FLIP KART: It is an Indian based company which has got its importance because of the ease at which order can be placed. It has a wide variety of products which can be ordered at just one click. It also has the option of net banking, cash on delivery to ease the process of ordering. DELIVERY: Delivery refers to how well the product or service is delivered to the customer. It includes speed, accuracy, and care attending the delivery process. Today's customers have grown to expect delivery speed: pizza delivered in one-half hour, film developed in one hour, eyeglasses made in one hour, cars lubricated in 15 minutes.

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Eg: CEMEX: CEMEX, a giant cement company based in Mexico, has transformed the cement business by promising to deliver concrete faster than pizza. CEMEX equips every truck with a global positioning system (GPS) so that its real-time location is known and full information is available to drivers and dispatchers. CEMEX is able to promise that if your load is more than 10 minutes late, you get a 20 percent discount.

PROFESSIONAL COURIERS: Professional courier u grown and placed itself as one of the important courier industry in India with an experience of 24 years. Their main reason for the growth is their timely delivery of goods. They also had the option for their customers to keep tracking their products.

INSTALLATION: Installation refers to the work done to make a product operational in its planned location. Buyers of heavy equipment expect good installation service. Differentiating at this point in the consumption chain is particularly important for companies with complex products. Ease of installation becomes a true selling point, especially when the target market is technology novices. Eg: SUN DTH: It is a DTH company from sun groups. It has been started recently and grown bigger because of its quality of services they provide. By making a phone call official arrives with the product and installation is made and connection is given. They also make the installations free. DON RACKS: It is a Chennai based company manufacturing steel racks for retail outlets like textile stores, super markets, vessels shop, etc. Their main policy is to accept the full payment after installing the racks. They take the full responsibility for the product until it is installed. CUSTOMER TRAINING: Customer training refers to training the customer's employees to use the vendor's equipment properly and efficiently. General Electric not only sells and installs expensive X-ray equipment in hospitals; it also gives extensive training to users of this equipment. Eg: TANISHQ: It is a branded jeweler retail outlet from TATA groups. IT has number of branches all over the country. They carry out customer relationship programs to all their employees to train them to make interactions with customers. McDonalds:McDonald's requires its new franchisees to attend Hamburger University in Oak Brook, Illinois, for two weeks, to learn how to manage the franchise properly. CUSTOMER CONSULTING: Customer consulting refers to data, information systems, and advice services that the seller offers to [5] buyers . Eg: UNIVER CELL: UniverCell is a mobile showroom in India. It is a Chennai based company. Main reason for the growth of the company is that you can see the demo of the mobile you are willing to buy. They will also suggest you with the various models available, various features available in a particular model. It is the only outlets in Chennai were you can use the demo model and you can buy the product. PRICE: Price is the main criteria which many companies choose to differentiate their product. When a product is differentiated with their competitors by price then it easily reaches the customers, so many companies opt for price differentiation to obtain an advantage over their competitors. It is achieved either by increasing the price to show the increase in quality or by reducing the price to attract the people.
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Eg: TATA NANO: Cheapest car in the world. Starts at 1.23 lacks onwards. Main target customers are lower middle class group. Main aim is to transfer the people from two wheelers to four wheelers. SARAVANA STORES: It is one of the big retail outlets in tamilnadu.They have variety of products ranging from jwellery,textiles,shoes,electronics etc.From the day they established the shop they have been famous for lowest price in the city. They have got a brand image by providing goods with low price.

PLACE: Place may be making the product or service more readily available through multiple locations, longer hours of operation, or over the Internet. For some market segments, exclusive distribution is preferred because the upscale target customer wants uniqueness or distinctiveness (a potential segmenting dimension) in the products or services they buy. Or they may prefer a full-service reseller instead of a self-service reseller. Eg: JOY ALUKKAS: Joy alukkas is a Kerala based jewellery retail outlet started in 1957. They provided quality with large variety of jewels to their customers. Seeing the requirement for jewels all over the world they expanded their business internationally. They made their goods readily available to their customers. Currently they are running 80 retail outlets over 9 countries. This wide expansion is also one of the reasons for their growth[6]. KFC: KFC is an American based food supplier. They mainly supply fried chicken. When they started they were monopoly in the market. So they thought of making it readily available to the entire world. Now more than 14000 outlets are available thought the world[7]. PROMOTION: Promotion is utilizing unique and breakthrough advertising to project the desired image of your company, product or service. It may be an off-the-wall promotion offer that will make you stand out in the mind of your target audience. It may be using a totally different advertising medium than your competitors that will better reach a specific market segment that you want to "own." Eg: VODAFONE: When Vodafone entered Indian market they faced huge competition from local players so they thought of gaining advantage by advertising it through media. So they created advertisements using a character called ZOO ZOO, which became very popular among the customers.

ENTHIRAN(ROBOT): Enthiran is highest budget film ever released in Indian industry. It was produced by SUN pictures with a budget of 132 cr. Since it is a high budget heavy promotion is done regain the profit. As a promotion process they kept audio launch at Singapore. Star cast involved in
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the film is itself a great promotion for the film. They even created hike for the film by releasing making videos, teasers before the movie release. Finally movie made collection of about 255 cr[8]. PEOPLE DIFFERENTIATION: It is putting better, more qualified people in contact with the customer than your competitors. If all your competitors do a feature benefit sell, maybe you can differentiate your company by using a consultive approach to selling. Offering better customer service, service after the sale or making fewer mistakes than your competition can generate repeat business. It has been said that you "get the business on quality and price, you keep the business on service." Perhaps it's simply being more friendly in customer contacts. Doing business with nice people is a segmenting dimension for some customers . Eg: SINGAPORE AIRLINES: Singapore Airlines enjoys an excellent reputation in large part because of its flight attendants. Becoming a Singapore Airlines flight attendant is not easy company requirements are strict. But Singapore Airlines has a worldwide reputation for excellent service, built largely on the customer relations skills of its flight attendants[9]. VALUE OF DIFFERENTIATION Neutralizing Threats. Here is a brief description of how product differentiation can neutralize the threats of the forces mentioned in the Five Forces Model along with an example of each one. If the focal firms product differentiation strategy is effective: Threat of Entry would-be entrants face the costs of overcoming customers preferences for the focal firms products and/or services Example: Toyota was protected from Hyundais entry into the U.S.market because Hyundai had to enter at a low price and advertise heavily to attract customers away from Toyotas wellestablished Corolla. Threat of Rivalry customers have, to some extent, segmented themselves based on their preferences for the products of the several competing firms in a market. Thus, the rivalry is generally lower among firms competing in a market of differentiated products. Example: Allen Edmonds mens dress shoes sell for around $300.Most models have thick leather soles that conform comfortably to the foot. Once a customer wears Allen Edmonds shoes, he tends to be very loyal to the brand. Cole Hahn is a competitor at the high end of the market. Some people prefer Cole Hahn, some prefer Allen Edmonds and once the customer decides on a preference, there is little competition remaining between Cole Hahn and Allen Edmonds. Product differentiation attenuates rivalry for Allen Edmonds because competition for customers is minimized due to customers self selected segmentation Threat of Substitutes customers will find the focal firms products and services substantially more attractive than substitute products (i.e., customers are less inclined to even try the substitute product and the focal firm is therefore insulated from the threat of the substitute) Example: Printing digital photographs on a personal printer at homemay be viewed as a substitute for professional printing at a photoshop. Photo shops that advertise that their digital prints are superior to what can be printed at home are attempting to create a preference for their product. Shops that successfully convince customers that their product is superior are insulated from the competitive pressure of the in-home substitute. Threat of Suppliers the power of suppliers may be mitigated in two ways. First, the focal firm will likely be able to pass supplier price increases along to customers who have a preference for the focal firms differentiated product (customers with a preference for a differentiated product tend not to be price sensitive).Second, a firm that enjoys the strong preference of customers will usually have more bargaining power with suppliers compared to competitors that do not have differentiated products and services.
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Example: Recent spikes in the price of beef are easily passed on tocustomers of high-end steak houses like Ruths Chris and Spencers .McDonalds, Wendys, and Burger Kings customers are more sensitive to price increases that make the $.99 burger a thing of the past. Threat of Buyers the power of buyers is reduced because the focal firm enjoys a quasimonopoly. By definition, if a firm has a highly differentiated product, then the firm is the only firm in that market that can offer that particular product. Customers with a preference for the focal firms products and services must buy from the focal firm, thus reducing the power of buyers. Eg: Daimler-Chryslers Crossfire sports car has allowed dealers to enjoy aquasi-monopoly as evidenced by the local market adjustment (of about $5,000) that dealers are able to tack onto the price of the car. The car is different from other cars and a set of customers has a strong preference for the car. There are a limited number of the cars being built. These factors serve to greatly reduce the power of buyers of the Crossfire[10].

FAILURES OF PRODUCT DIFFERENTIATION: It is not each and every time when a company comes with a differentiation in their product it gets success. There are many products which when differentiated got failed. REASONS: When the differentiated product does fulfill the demand created by its previous version. When there is no demand for differentiated product. When the existing product is doing well in the market chances for failure of the product is more. When the differentiated product does not reach the target audience. EXAMPLES OF FEW PRODUCTS WHICH FAILED IN THE MARKET: FROOTI FRESH N JUICY: Frooti is the first tetrapak fruit juice in India. Frooti still holds a dominant position in the Rs.300 cr tetrapak fruit juice market. Frooti over the years has carved out niche for itself in the market. Initially it was targeted to kids alone. Then it was accepted as healthy drink by mothers. So it was treated as substitutes to cola drinks. So within a short span of time company got huge success.

Lured by the success of frooti among kids it came up with yo! Frooti by changing it packaging to attract youth, mainly between 16-21 age grouped people .But it did move as expected and the company stopped producing it. Main reason for its failure is there was actually no need of a new product as old was running good.

NEW COKE

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In early 1970s coke faced tough competition from its competitors. To remain number one spot coke executives decided to cease the production of classic coke in favour of new coke. The public outraged and coca-cola was forced to get back to its original formula immediately.

LG-WEB ENABLED REFRIGERATOR:

During the soccer World Cup when endless advertising for LG's internet refrigerator offered seamless internet access, even while you were grabbing a half-time drink from the fridge? Well ... that particular future never happened, because rather than dragging technology into the kitchen, the internet fridge faded swiftly from the Australian landscape. The $17,000 price tag didn't help either, given that the appliance could access the internet, play music and take photos feats achieved comfortably by a $1000 laptop sitting on a kitchen bench next to an unconnected $2000 family-sized fridge[11].

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CONCLUSION: Innovation and hard work always get paid well. To introduce a product every company takes huge efforts to make it a success. To break into a new path in an existing field requires strenuous efforts which is nothing but bringing a differentiation in the product which is always proved to be successful. Failures occur rarely when the customer and his needs are not read properly. Hence if customer needs are well read and marketing mix is applied rightly success is certain.

REFERENCES: Kotler, 2009, Marketing Management, 13th edition (P 313,314). http://branduniq.com/?s=differentiatin+strategies Kotler, 2009, Marketing Management, 13th edition (P 314-316). http://branduniq.com/?s=Differentiation+Strategy%3A+How+to+Gain+Competitive+Advantage+Th rough+Product+Leadership 5. Kotler, 2009, Marketing Management, 13th edition (P 319). 6. http://www.karnatakaspider.com/business/4335-Joy-Alukkas-Jewellery-Bangalore-M-G-Road.aspx 7. www.kfc.co.in 8. http://en.wikipedia.org/wiki/Enthiran 9. Kotler, 2009, Marketing Management, 13th edition (P 289). 10. http://www.scribd.com/doc/87664485/Product-Differentiation. 11. http://www.smh.com.au/digital-life/digital-life-news/failure-to-launch-20100120-mk8g.html 1. 2. 3. 4.

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