Differentiation Strategy: The Successful Approach

When starting a small business you need to make sure that your business will take the right direction, by implementing the right strategy, in order to achieve a competitive advantage over your competitors. A competitive advantage will help your business attract more customers, increasing revenue and profitability. A differentiation strategy can provide a competitive advantage by differentiating your business from your competitors and at the same time offering what your customers need.


How to differentiate

A differentiation strategy will pursue a unique position among your competitors. The aim of the strategy is for the business to become unique in the minds of its customers. For this reason, a small business needs to create a product offering that is somehow unique. Uniqueness can be achieved through different factors like design or brand image, technology, customer service or other attractive features.

For example, you can offer a specific design that your competitors cannot offer and target a specific group of consumers. In a few words, find your niche. Advertising is a great way to increase brand image and exposure. A small business can create specific ad campaigns targeted at specific groups of consumers instead of pursuing mass media advertising campaign which are highly costly and not as efficient.  Invest on technology to improve the way you work and be able to satisfy better your consumers. With the use of the Internet, customer service can become more efficient for you and your customers, decreasing your costs and offering more information about your brand.

The aim of differentiation strategy is to create brand loyalty, which in turn can create price inelasticity on the part of buyers. As a result, customers will be less sensitive on price decisions, and more sensitive on the actual product. In turn, it can erect competitive barriers to entry, higher margins and possibly mitigate the power of buyers who will eventually lack acceptable substitute products. When altering factors like design , technologies and more to differentiate yourself, it is important to focus on the customer’s needs in order to design those factors appropriately.


Spend more to get more

Taking risks is a great part of running a business and sometimes it may give good outcomes but in other times bad ones. Success will bring success; it’s a cycle which is hard to sustain but easy to break.  Offering customers a high quality product is the best differentiation strategy any small business can use to succeed.

Such a strategy may bring future complementary strengths to a small business. Imagine a small business offering a high quality product to each customer. Satisfied customers will recommend the product to more customers and allow the business to increase its profit margins. Increased margins will allow the small business to use aggressive marketing and thus increase its market share. As the business grows, economies of scale can arise, providing a cost leadership for the business. My point is that you should thing long term, take risks and be patient.

Pursuing the exact opposite strategy, offering low quality products, will only decrease profit margins and market share, reduce the business resources and give a long term direction to the business that nobody wants. Implementing strategies is a great ability top business leaders have and thus learning more about leadership is vital if you want to create or run your own business.


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