Companies pursue various marketing strategies to attract customers to them rather than to competitors. A differentiation strategy allows companies to communicate the unique features of their products and create a niche for the product. Differentiation strategies have strengths and weaknesses.
One strength of a differentiation strategy is that it builds on the unique qualities in a product. The company analyses the specific product and compares it with similar products offered by competitors. After comparing, the company creates a list of characteristics its products contain that the competition's products lack. These characteristics differentiate the product, and the company communicates these qualities to customers through individual customer interaction and by including this information in its advertising.
Some companies build on their reputation when using a differentiation strategy, using company image as a strength. Consumers expect some companies to build innovative features into their products as a result of the company's previous products which included unique features. These companies market their brand and their business by communicating their past successes as an indication of the company's current and future performance. Customers recognise the company and connect its image as one that meets different standards than other companies.
One weakness of using a differentiation strategy involves the challenge of changing the customer perception. Many consumers perceive the product as equivalent to alternative products offered in the marketplace at a lower price. Consider cereal. Large companies strive to differentiate their cereal brand as a higher quality than cheaper cereals. However, many consumers purchase store-brand cereal because they consider the products equivalent.
Pursuing a differentiation strategy requires a larger financial investment from the company, another weakness. In order for a company to convince consumers that its product includes unique features, it needs to communicate this information to the consumers. These companies use advertising to show consumers the differences. Television commercials and magazine ads come at a high cost for the company. Direct mail advertising includes paying for postage for consumers whether they purchase the product or not.