When Vietnam joins WTO, there is a big competition among companies. They continuously manufacture various products and offer best services. But the issue here is how they can make money from customers who only want to spend their money once. Products are always abundant on the market. However, there is scarce situation that only one company providing products or services which is really unique. This means that the available products or services are on the way to be similar and identical. For that, differentiation is a necessary factor for all companies to think of. A company wants to survive.
It must differentiate its products or services to gain sustainable competitive advantage. This report focuses on outlining and evaluating the concepts of the differentiation and different ways of offering differentiation. Definition of Differentiation Kotler and Keller (2006) defined differentiation is the meaningful differences between the company’s offer and competitor offers. Differentiation is all what makes the company’s brand stands out in a sea of competitors which are almost identical. If the company does not have differentiation, it will not be possible to build a strong brand and gain competitive advantage.
Products are manufactured from factories but brand is built in customers’ minds. In reality, brand is the concept that exists in customers’ perception (Tai and Chew, 2008). Brand differentiation will make positive impression to customers when they view the company. If customers cannot find the differentiation between the company’s brand and competing brands, they will buy products with lowest price. Therefore, the key of differentiation is “brand” (Kotler et al. , 2006). For example, Evian is doing business as selling water. Water is a commodity available everywhere – 80% of the earth is covered by water.
But water of Evian is supplied from Alps Mountain. And then mineral is added to this water. Those things made Evian become a strong brand. Water is just water but there is a big differentiation is that Evian water is mined from the Alps Mountain (Evian, 2007) The organization can have control over many components – making creative products, lowing cost, deciding products’ quality. But brand is another matter. It occurs only in customers’ minds and it has 100% up to customers how they perceive the company’s brand. However, in the competitive market, the company needs to go beyond tradition of offering products or services.
To differentiate its market offering, an organization can use the highlights of five dimensions are product, service, personnel, channel, and image differentiation. Product Differentiation Differentiation of product is a business strategy that the company attempts to create a number of differences in its products to compete with competitors’ products. And these differences must be perceived by customers.
When customers perceive the differences and have preference for the differences, that company may lead the market and gain competitive advantage (Hooley et al. 2004). To have the success of the product differentiation, the company is able to effectively differentiate the main aspects of its products such as form, design, durability, features, style, performance, reliability, conformance, reparability, and style. Those basic aspects of the differentiation usually play an important role in creating product differentiation because they allow the organization to concentrate on creating and exploiting particular differences between its products and competitors’ products.
However, in reality making a product differentiation seems easier than convincing consumers that differences exist. Almost anything could be basic aspect of differentiation. The key is customers who can find value of differentiation in products they buy. Customers’ preferences are created by actual differences in products. For example, which kind of toothpaste do customers often use? That totally depends on customers’ preferences from the product. The key features of toothpaste are dental protection, whitening teeth, fresh breath…
Colgate is a strong brand in those fields and it has the feature of protecting teeth. First, Colgate found a solution for toothpaste that can protect against oral vulnerability, dental plaque, gingivitis, and fight bacteria within 12 hours. With the name of Colgate Total, this toothpaste has copolymer – fight bacteria and flour – whitening teeth and fresh breath. With tests on 60,000 patients, this product is certificated by American Dental Association and Food and Drug Administration. And now Colgate can distinguish itself as “dental protection”.
Besides Colgate Total, there is still a lot of toothpaste having distinct features that making them lead the market such as Pearlie White is also a strong brand because it owns the special feature of whitening teeth. In addition to some customers who want to have a fresh breath, they will buy Darlie toothpaste. According to traditional ideas on product differentiation, design is the factor that will help a company gain competitive advantage. Design is much more focused on feature that effects how a product looks and functions in term of customer requirements (Kotler and Keller, 2006).
For example, Coca-Cola also sells a product that is basically popular drinks. Coca-Cola and Pepsi are quite similar. But Coca-Cola design is a big differentiation. Bottle shape of classic Coca-Cola has become an icon and it plays an important role in differentiating the Coca-Cola with other beverage. The other differentiation factor of Coca-Cola is red cans that gain positive impression from who love Coca-Cola (Coca-cola, 2010) In fact, based on market condition each company can decide which strategy is best suited for its business.
The company can differentiate its products from price competition but it is not a best choice because it affects the company’s existence, product quality and increases competition among companies. On the other hand, non-price competition is another matter. It is a long term strategy for most of companies to focus on. As mentioned above, feature and design can also become key dimensions to help the company differentiate itself. Certainly, there is not only feature and design but also other ones. Being flexible in using the aspects of the differentiation makes company gain competitive advantage.
Service Differentiation Zeithaml et al. (2006) said that services are intangible things such as deeds, processes, and performances. Service differentiation indicated that the company attempts to distinguish intangible things that it is offering from competitors’ offerings. If products cannot be differentiated easily, the company may add value to service as well as improve their quality. The main aspects of service differentiation are ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair (Kotler, 2006)
Nowadays, the company has been thinking a lot about the phrase “Customer is King” and one of the keys to a successful sale strategy is creating value actually worth buying. Over the last decade, there was a decline in traditional selling. Is it because of poor quality? No. It was mainly a function of delivery. When consumers ordered a product, they might wait for a long time to be delivered. However, today’s customers have increased the expectation of the delivery speed so almost company has to improve speed of delivery as a part of sale strategy.
For example, Dell is leading personal computer industry by always doing well its positioning phrase “be direct”. Dell makes it easy for customers to have their own computers by custom-design and deliver quickly to their doorsteps or desktops. Today, Dell’s competitive advantage is speed in manufacturing as well as delivering. Dell does not have a single warehouse and its manufacturing process only have 72 hours that making Dell one of the fastest organizations without delaying single customer order on the planet (Zarley, 2005).
There is a difference between product and service offering that people buy products because they believe they work but with services, people deal with people. They like and they tend to buy services because they believe they will like them (Knisely, 1979). For example, Giordano and G2000 are two Hongkong companies. They are good at service and stable through many years ago. Every time when customers step into Giordano store, they will be welcomed with open arms. Salespeople always smile and say to customers: “Please, feel free to go shopping, we will be right when you need support”.
Even when customers tried a lot of stuff, they don’t buy anything. Salespeople still smile at them. When customers leave, they said to them: “Have a nice day and see you again”. G2000 is also the same (Giordano, 2010) Service differentiation is more sustainable than product differentiation because it is made by human being so it is difficult to duplicate. Human being almost has their own thinking and they often follow requirements. In fact, human being not only does not follow what people want but also do whatever not to be expected.
Service differentiation is based more on human being that can be changed easily and uncontrollably. To gain sustainable competitive advantages, the company must pay more attention to staff training and internal marketing practicing. Personnel Differentiation The role of people in the company that affect organization’s success directly is very important. The company can achieve the highest success through having better-trained people related to competence, courtesy, credibility, reliability, communication.
Therefore, personnel differentiation is a difference between trained people of the company and its competitors’ trained people (Kotler, 2006). For example, Hay-Adams has long been a favorite hotel and meeting place for diplomats, politicians, business leaders and tourists. In 2000, to maintain its image it made strong use of the warm, hospitable manner in which the hotel’s staff had many years provided service. The introductory communications followed featured photography of the hotel’s luxurious new rooms and friendly faces of the staffs. The guests arrived at Hay-Adams.
They were greeted by professional staffs who serve them from breakfast to bed consistently. To this day, the Hay-Adams continues adhere to train professional staff who can communicate visitors well to consult them which one is the best for their trip and they continue to attract the most discriminating visitors to the nation’s capital. Up to now, booking rate is reaching a new high (Hay-Adams, 2006) As product and service differentiation, personnel are also an important factor of differentiation because customers often expect that there is skilled staff to make their transaction become more convenient.
Therefore, the organization must recruit as well as train the skilled staffs that help them in gain competitive advantage as well as build a strong brand. Channel Differentiation According to Kotler and Keller (2006), companies can achieve competitive advantage through the way they design their distribution channels’ coverage, expertise, and performance. For example, L’eggs is a brand of women’s stockings in U. S. This brand has become famous because they are specializing in selling stockings throughout distribution system. This is the first stocking brand are sold exclusively through supermarket systems.
It is hard to believe that kind of products like women’s stocking sold through the supermarket channel. But that thing made the success of the L’eggs (L’eggs, 2010) Channel differentiation is one of effective methods but it requires the company to put high effort on leading the distribution channel, performance, or expertise to gain competitive advantage and build a strong brand on the market. Then they need to try more to keep this brand time by time. It is very important because if they lose their concentration, their competitors can gain their competitive advantage easily.
Image Differentiation Why is it that some brands have a following that defies logic? Around the world, brand like Nike sport gear, Lego toys, Coca-Cola beverages, Google internet service, and Singapore Airlines have a relationship with their customers that go beyond just their products and services that they provide. Their customers act as if they were in love. Thinking of brand as object of love somewhat reflects the thinking of authors Marc Gobe in Emotional Branding, Kevin Roberts in Lovemarks, Marty Neumeier in Brand Gap and others.
Although each author has a distinct point of view, what unites them and others whose thoughts about branding. Nowadays is their understanding of the ways that how an organization can differ its image from competitors’ image in customers’ mind (Kotler, 2006). According to Kotler and Keller (2006), there are many ways to differentiate image such as differentiate identity, image, symbols, events, atmospheres. But of those factors, identity and image need to be distinguished. Identity is the ways a company aims to identify itself to its publics. For example, Singapore Airlines become one of the world’s leading brands.
The reason that Singapore Airlines is one of the best at using an attractive woman not only for flight service as customers expect from any airline, but moreover to symbolize their brand. The brand was the first to use the cut-out figure of a flight attendant in travel agencies and in airport facilities – she typically the subject of Singapore Airlines’ advertising campaigns. Since 1973, more than any other airline, their “Singapore Girl” has put a human face on their brand. Visually, the patterns in the cabin and lounge decor relate to the Singapore Girl’s uniquely patterned dress.
In the 1990’s, the brand began using a consistent scent for her perfume and in hot towels served before takeoff. Upon entering any Singapore Airline cabin, the aroma is always the same. And so is the music that is consistently played at key times during the flight and in the waiting areas outside. It has s soothing Asian character that puts passengers at ease the minute that you hear it. Care is taken with the textiles and other surfaces that you touch during a flight. A team of chefs from around the world is retained to introduce new meals – all with at least the hint of an Asian accent that is consistent with their brands’ image standards.
Singapore Airline is a good example of identified brand to express the brand’s core values (Singapore-Airline, 2010) Image is the way the public perceives the company. Usually, image does three things as establishing the product’s character, conveying the character in distinctive way, and delivering emotional power (Kotler, 2006). For example, Harley-Davidson was established in 1903 by William Harley and Arthur Davidson, is one of the companies has not only more customers but also more fans. Harley-Davidson motorcycle is a rebellion from the look, sound to accessories and who are riding Harley-Davidson.
Harley- Davidson is synonymous with the rebels on two wheels vehicles. Harley’s personality is a differentiation between Harley and all competitors in the world. Is it the best motorcycle in the world? Up to now, Harley-Davidson has faced with several attacks from Japanese competitors – Yamaha, Honda, Suzuki, and Kawasaki. Both have good quality, high speed, easy control, and low price. But Harley-Davidson has still survived because its reliability, style, performance, feature are a differentiation. Harley is not the highest speed motorcycle.
Customers buy Harley because its sound, feel, and look. They buy Harley is to have spirit of Harley (Harley-Davidson, 2010). Image differentiation is a difficult thing because it has concern with customers. The organization can control their all activities but they cannot control customer thoughts. To have Image differentiation, all departments of the organization must work together and focus on the company’s objective. Conclusion Nowadays, there is a big competition among companies and it is also increasing day by day.
The company has only way is differentiating itself that suits customer demands and is able to keep its differentiation stand out in the sea of competitors. In the company, it can differentiate itself through five main dimensions that were outlined above. Which dimensions are best one depends on company’s business objective. The last one concerns customers who perceive and respond to company’s differentiation. Customers have perception of differentiation that makes the company succeeds in the process of building a strong brand and gaining sustainable competitive advantage.