What is the Differentiation Leadership Strategy?

Every business' primary goal is to increase profit margin by selling products and services. But what profit is there to make if aggressive competition saturates your market? The competitive nature of entrepreneurship has made many cower out of this warfare. Is your business also struggling to survive in its industry? One of the best business strategies for winning this war is to stand out using this article's six differentiation leadership strategies.

What Is The Differentiation Leadership Strategy?

Have you ever been in a mall where many items fed your eyes? Now ask yourself: What made me choose item X over article Y, even though they produce similar products? Most times, the answer is differentiation leadership strategy.

The manufacturers and sellers of item X have done their market survey and created a distinguished image of themselves. They have branded their products and promoted their products as the best. So, unconsciously almost everyone goes for item X.

Thus, a differentiation leadership strategy is when businesses use price, brand image, quality, reputation, and other methods to present themselves as the best, ideal, and outstanding product or service.

Types of Differentiation Strategy

Being in business is much more complicated than it was ten years ago. According to SBA reports, about 50% of businesses die within five years of their start-up, giving new companies a 50/50 chance of survival. Therefore, the way to the top is to be different from the 50% of failed and undifferentiated businesses.

Monotony wearies customers. They desire to have a product or service that can serve them better. Customers go for the most qualified product they know, like, and trust. And that's what the outstanding entrepreneurs do: they separate themselves from the competitors, carve a niche, arouse consumers' cravings, and take the lead. Would you want to lead and increase your business profit margin like Amazon, Meta, Microsoft, Coca-Cola, and other reputable brands which first chose to do business differently?

Here are the six differentiation strategies you can apply in your business.

1. Product Differentiation Strategy

Leadership in your business sometimes requires that your product be invented from zero to one or be ten times better than your competitors. Adding new features to your product is an ideal business strategy.

Rolex Watch is an example of a product differentiation strategy. Rolex took leadership of the watch industry when it manufactured watches that customers could customize their names on. In 1926, Rolex watches were the first waterproof watches in the world. Rolex watches are also famous for being luxurious products.

2. Price Differentiation Strategy

You need the perfect price differentiation strategy if you want more targeted customers to purchase your product. And there's no straightjacket rule to this. The price can be high or low – it depends on market factors such as product, service, tax, consumer, demand, and supply rules.

Customers buy based on their emotions and logic. Most wealthy individuals prefer luxurious products of high-status symbols. They feel the higher the cost of a product or service, the higher the price should be — for example, an Apple iPhone 14 Pro Max costs between $1,041 and $1,399. And there are still 1.36 billion iPhone users all over the world.

Nonetheless, on the parallel plane, billions of buyers will only purchase a product they can afford. So, thriving businesses conduct market surveys to confirm the best price differentiation strategy that can increase their profit margin.

3. Service Differentiation Strategy

Why has ChatGPT been a buzzword since its launch in November 2022? Search engines have been existing since the nineties. But the service which ChatGPT offers is different from search engines such as Yahoo, Google, Bing, Baidu, and others. ChatGPT composes fiction and nonfiction, answers questions, creates art prompts, writes codes, and has other unique features.

ChatGPT, like other sought-after businesses, thrives because of its unique services. We all want efficiency, comfort, and speed. If you want your business to have popular demands, then your service should be better in efficiency, speed, and features. Study your market, identify what is missing, and create a service your targeted consumers will desire to patronize.

4. Image/Brand Differentiation Strategy

Branding makes potential customers perceive your product as the best and their only choice or (worse) another substitute. It includes your business name, logo, colors, service, product, client-seller relationship, vision, mission, marketing strategy, and other branding features.

Brands like Twitter, Nike, Tesla, Unilever, and Ford Motors stand out because of the image perception they sell to the audience. They make us feel they are the best and most efficient in their industry.

5. Distribution Differentiation Strategy

How a product goes from the manufacturer to the consumers is crucial in production. Distribution affects the price, consumer satisfaction, and profit margin. If the supply chain is efficient, consumers will purchase at the best time, quality, and price.

An example of a company with a good distribution strategy is Amazon. It offers buyers and sellers a sales platform. Buyers can purchase items from any part of the world and have them delivered to their doorsteps.

6. Relationship Differentiation Strategy

Customers believe they are always right. So, how you treat them will determine if they will hire or fire your product or service. A sustainable business must have a good buyer-seller relationship.

Consumers want to be sure you understand and feel their pains. They want to be sure you care for them more than the price tag placed on your product or service. Serve your customers with love, attention, sincerity, and details; they will not stop knocking on your shop.

Benefits of Differentiation Strategy

There are several benefits of a differentiation strategy for your business. Here are some of them:

• A good differentiation strategy gives customers the impression that your brand is the best quality.
• When your business has a differentiation leadership strategy, you can dictate the price of your goods and services.
• Since customers find your business unique, they stay loyal to your brand.
• Differentiation strategy makes it very difficult for others to compete with your business. It reduces or eliminates substitution.

Conclusion

Applying the proper differentiation leadership strategy can change your business' profit margin from a zero-profit company to having millions of hot demands worldwide. Pick a business strategy from this list and start making a difference.