This is the second article in the series about creating an effective brand differentiation strategy for long-term competitive advantage. In the previous post I explored product-based differentiation and positioning. But let’s be honest: there are only a few companies who are able to implement and support a differentiation strategy based on product. The main reason is that in today’s global economy outsourcing a product has become easier than ever and product features are quickly copied.
As a result most companies are looking for alternative ways to distinguish themselves from competition. One of the most common avenue being pursued is a differentiation strategy based on delivering better/superior service.
Is Service Differentiation The Right Strategy For My Brand?
This strategy is an effective option where products cannot be easily differentiated and are perceived as commodities. In addition, companies in the service industries will most probably find this strategy suitable for gaining a competitive edge.
How Can A Brand Be Differentiated on Service?
Just like product differentiation, there are multiple ways to set your brand apart on service. Here are some:
Speed of delivery-is a benefit that most consumers value and are willing to pay extra for. If your company is able to deliver goods or services to the consumer faster than the competition speed of delivery might be the competitive advantage that’s worth pursuing. This is a great way to differentiate for non-FMCG companies, where products take longer to manufacture or are made to order: furniture, heavy-duty equipment, custom clothing and jewelry, to name a few. The perfect example comes from an industry where delivery is the actual product being offered. In a smart strategic move Fed-Ex decided not to compete head-on with UPS, but instead focus on overnight shipping. Their effective positioning was reflected in their famous slogan “FedEx: When it absolutely, positively has to be there overnight”.
Availability-no brand, no matter how great the positioning and communication strategy, will make it to the consumer’s shopping list if it is not present in the places they shop. A brand that is readily available in more places than the competition could turn availability into a competitive advantage. Husqvarna, the world leader in outdoor power products, maintains its number one position through a well-established network of independent, specialized retailers that provide greater geographical coverage than competition (combined with superior service and support). Enterprise made the car rental process easier by pioneering the free customer pick-up service. As a result they have become the number one car rental company in the US.
Loyalty programs-is a great way to generate repeat purchase and build a solid customer base. Moreover, rewards can create brand preference particularly when the products are not easily differentiated. In order for any loyalty program to work it has to be simple to subscribe to, collect, and redeem the rewards. These initiatives are very popular in North America, with the major credit card companies, retail chain and major airlines competing to provide the most rewarding experience.
After sale service and training- is a differentiating advantage for companies involved in manufacturing and marketing complex products that require assembly, operating instructions, regular maintenance and updates: plant equipment, furniture, enterprise resource software, etc. A well-trained sales force and service personnel are required to continually deliver on this promise.
Warranty-is a great way to create brand preference. Warranty coverage provides consumers with piece of mind and reinforces the company commitment to product quality. When Hyundai first entered the North American auto market with its Excel model, the company quickly built a negative reputation due to the car’s poor reliability. Many dealers made money only on repairs, while others ended up abandoning the product. The company was subject to many jokes such as “Hyundai: “Hope you understand nothing’s driveable and inexpensive”. Today the South Korean manufacturer has become the fastest growing automaker in North America due significant investments in quality and design, backed by “America’s Best Warranty”: 5 year-100,000 miles warranty program”.
Service Differentiation: The Bottom Line
Building a differentiation strategy on service requires a dedication to attracting, retaining and training the best people in your industry and building a network of extensive, reliable partners. Since this strategy is based on intangibles such as knowledge, dedication and human touch service differentiation could offer a solid competitive advantage that is relatively easy to defend and reinforce year after year.
Check out the brand positioning tutorials page for more articles on how to build strong and differentiated brands.