Advantages of Differentiation

A differentiation strategy has several benefits and advantages

1. You do not have to compete on price alone – Since you have distinguished yourself from your competitors, the potential customer can’t reduce their choice to price alone.

2. You have greater appeal to your target audience – Since you are different (and, presumably, better), you become a more appealing choice. This makes generating interest and closing sales easier.

3. There is no direct substitute – If you are different from your competitors, you can’t be compared to them. Potential customers have to focus on what makes you different.

4. You increase loyalty – The combination of superior value and the lack of comparable substitutes can generate more brand loyalty. If you deliver on your promise, and there is no comparable alternative (similar competitor) to switch to, there is no good reason to switch.

5. You can command higher fees – If your differentiation adds true and unique value, you should be able to command higher fees. This is especially true if your differentiator is based on specialized expertise.

Examples of differentiation strategies

Suppose that hourly billing is widespread in your industry. Offering a fixed per-project billing model, instead, would separate you from competitors.

In a more focused strategy, you narrow your appeal to a niche audience.

For example, an accounting firm that works exclusively with chain restaurants has a very compelling differentiator targeted squarely at that niche market segment.
By being exclusive — not pursuing clientele outside its narrow industry focus — this firm has a real opportunity to dominate the niche they target.