How To Create a Differentiation Strategy Based On Superior Service

This is the second article in the series about creating an effective brand differentiation strategy for long-term competitive advantage.

In a 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 its features could quickly be 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 in highly commoditized categories where product features cannot easily be differentiated.

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 companies that market durable goods, where products take longer to manufacture or are made to order: furniture, heavy-duty equipment, custom clothing and jewelry, to name a few.

Another example comes from an industry where delivery is the actual product being offered. After 3 years in business and $29 million in losses Fed-Ex decided to narrow its strategic focus to overnight delivery. 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 rental cars readily available 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.

Loyalty programs 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.

Comments

  1. Hi Monir,

    Thank you for your comment. Obviously delivering a superior customer experience is the way to sustain your brand’s positioning in the long term.

  2. Hi Sumit,

    I agree with you that positioning on an “emotional need” is in most cases more sustainable in the long run. I will address this alternative in a future post in this series.

    However there are companies that managed to implement and successfully deliver on product and service-based positioning. My articles refer to a few success stories (Apple, Fed-Ex, Enterprise).

  3. Monir Sikder says:

    From my limited experience I consider having an edge on services. I cannot differentiate in the long-run as it gets copied by someone or the other or something better comes up. So edge over service (as a continuous process) should remain in focus.

    As the GURUS say building up on softer elements works better. For example I always buy cigarette from a shop next to my home as I think he knows my Brand of choice and how many packs I buy. Sometimes he asks me whether he should give two packets extra as the festival season is nearby and I might need more. He knows me!!! (It’s the comfort level…. yes as Gustav says Experience!)

    It is hard for others to copy as it’s an art and it takes time to practice. So differentiation for benefit of the brand should be on softer elements to have an edge over competition and the idea is to sustain it.

  4. Both product based differentiation and service based differentiation can be easily emulated.

    Try “emotional need” based differentiation.

    Discover an obvious emotional truth and then own that emotional space.

    Kodak once owned the emotional space of “memories”. Based on the obvious emotional truth ‘People take pictures to preserve memories’.

    By concentrating on product differentiation and service differentiation they may have stayed in the space of cameras and printers when the use of film became defunct. When they should have been the ones to invent the equivalent of Facebook. Which is how we share our memories now.

    If only Kodak saw themselves to be in the “memories” business the phrase “Kodak Moment” would still be relevant.

    Products and service differentiation have ‘life cycles’.

    Emotional needs don’t.

  5. David, thanks for your kind words. Delivering on the claim is indeed one of the criteria for choosing a good differentiation strategy. The other important questions are:
    Is my brand the first in the category to claim this differentiating idea?
    Does my differentiation idea translate into a meaningful benefit for the consumer?

  6. Gustavo,

    You found the perfect word to summarize this strategy: providing the best experience in the category. Thanks for your insight-much appreciated.

  7. Excellent article. Companies tend to forget that it’s all about the consumer and that often means service. If one can combine product differentiation and service differentiation, the offer becomes even stronger. Note that the company must be able to deliver, however, when making these claims.

  8. Michael,
    I believe that Service Differentiation can be sum-up in one word: Experience

    Most service companies have a me-too counterpart very close and the most significant advantage a service provider can have is the ability to deliver great consumer experiences every time the consumer comes to business. (BTW, I agree with how to do it)

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