D. A. , Firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle.B. Which statement regarding competitive advantages is true? Answer: B. This does not only mean knowledge of your own offerings, but also knowledge of the client´s world, the marketplace and – not unimportant: potential alternatives to your offering. There is only a focus on product features and functions. The differentiation strategy is one of the three main marketing strategies, along with the low-cost provider strategy and the focus strategy. A business should maintain high and efficient customer relations to accommodate the different types of customers it serves. Top pitfalls of strategic management 1. A. Sounds like an open door right? Let us consider two examples here, NetJets (USA, Europe, and China) and another of DC designs (India.) How can one apply a differentiation strategy for enhanced business performance? Are after sales services any beneficial to the business? Customer loyalty makes it difficult for new firms to enter into the market and compete with the existing firms thus existing firms are able to continue carrying out their functions. Learn more here. In order for a company to convince consumers that its product includes unique features, it needs to communicate this information to the consumers. Crafting & Executing Strategy (18th Edition) Edit edition. C. trying to charge too high a price premium for the differentiating features. B. Porter’s (1980) put forward three generic strategies i.e. Differentiation focus strategy … C. charging a premium price for the differentiating features. Pitfalls in Production Differentiation. They can market their products based on their earlier successes. The cost leadership strategy can be utilized by large firms and market leaders but not by new firms which are small or medium scale. C. The price premium is too high. Always understand your target audience before the choice of packaging. Take a good look at capabilities and competencies that are currently seen internally as differentiators. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. 6 tips for successful virtual sales calls…, Waarom krijgt CRM niet de liefde die het…. All rivals share a common input or raw material. Top pitfalls of strategic management 1. A second pitfall is that the company~' differentiation strategy produces a ho-hum market reception because buyers see little value in the unique attributes of a company 5 product. Differentiation Strategy. A product differentiation strategy is also particularly valuable for the company that is just beginning to build out its brand. Advertisement plays a crucial role in reaching the desired market group. To prevent our competition from cashing in opportunities that we have created we will have to add something unique to our vision. The planning document is seen as an end in itself. Thus a differentiation strategy helps create barriers to entry that protect the firm and its industry from new competition. The positioned differentiators are not relevant for the specific client or situation. This is something that is often overlooked and at least underrated – we seem to rather see our products or services to be unique by themselves instead of looking at the total picture. However, almost always the combination is! C. number of upscale attributes incorporated into the product offering. This applies even to add to the average market prices. D. length of the managerial experience curve. Which of the following is not a potential pitfall of a differentiation strategy? a focused differentiation strategy aims at securing competitive advantage with a product offering carefully designed to appeal to the unique preferences and needs of a narrow group of buyers which of the following is not one of the pitfalls of a low-cost provider strategy Consumers might perceive that the products being offered are of the same quality compared to cheaper brands thus might not purchase the more expensive brands. At this stage, they have not yet had the opportunity to establish emotional connections with the audience or earn the loyalty of customers. Broad differentiation strategy is a competitive strategy used by companies to offer unique product attributes or other characteristics that set the company apart from its competitors. If a firm dealing with children’s clothing over differentiates and starts producing adult clothing they lose their market in children. A. Uniqueness that is not valuable. However, during my work with organizations in many different industries across the globe I have learned that it is often not as easy as it may sound. Not considering implementation: Implementation isn’t discussed in the strategic planning process. Differentiation is based on three parameters; product, pricing, and organization. A poor customer relationship will lead to reduced profits while a good one will earn customer loyalty and ultimately lead to improved profits. And after that, take another good look to see if these are really of value to the client or prospect where you are positioning these. First, makes sure you know your target audience if you want to appeal to kids, make sure you are well versed with the latest cartoon features to include in your product branding. , Firms that underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain.C. NetJets is a company that buys aircraft and allows corporate clients to buy part-ownership of that aircraft. By carrying out differentiation strategy, the brand loyalty of users will be cultivated successfully and the corporation can also avoid … In the case of a service industry, a major player would be Air Asia, a low-cost Asian flight operator which operates only in Asia at a very low cost. They pass along a lot of the benefits of this economy to their customers in the form of lower prices. Tom Peters. A. The truth is, having after sales service only attracts more customers and makes you different from numerous other businesses that do not provide these service. This has made it very important for businesses to make their customers understand what different they have to Most of them initially developed parts, or even all of their service technology in house, which resulted in a range of unique and differentiated services. Differentiation Leadership Strategy. This differentiation strategy aims to differentiate a business from other similar businesses by offering services and products tailored to specific consumers. Sounds like an open door right? Let's imagine that you're the owner of a small hunting store. When substitutes hit the market at lower prices it negatively affects the differentiating firm since consumers will opt for the cheaper products compared to the products being offered at higher prices by the differentiating firm. Differentiation focus strategy describes a situation wherein a company chooses to strategically differentiate itself from the competition within a narrow or niche market. Consumers of differentiated products are not as sensitive to price changes, therefore, the manufacturers can increase their prices. Prices starting from $3 per page for your Homework Writing Help. Which of the following is not a potential pitfall of a differentiation strategy? Good customer relations is a major differentiation business strategy in the service industry. Your product should be superior compared to other products in the market and it should fulfill the consumers’ needs. C. All rivals share a common input or raw material. Television commercials and magazine ads come at a high cost for the … Not all the cost savings get passed along to the consumers, however. Make math learning fun and effective with Prodigy Math Game. D. Perceptions of differentiation may vary between buyers and sellers. At these times, differentiation is more important than ever – and many organizations are aware of this. Differentiation simply means using product features or functionality, innovation, brand image or customer service to make products and services more attractive to the potential consumer. Thus, even if a company succeeds in setting its product apart from those of rivals, its strategy can result in disappointing sales and profits in the event that buyers do not perceive the differentiating features as valuable or worth paying for. The cost differential between low-cost competitors and the differentiated firm becomes too great for differentiation to hold brand loyalty. This often leads to surprised responses from senior managers or product managers: “Don´t they know that?”. No matter how good and beautiful your product inside may look or taste if poorly branded, the whole product loses taste and flavor pre-purchase. Hosting providers like GoDaddy, 1&1 Ionos, and even Wix and Squarespace, started out offering a single service to business owners. Buyers thus sacrifice some of the features, services, or image possessed by the differentiated firm for large cost savings; 2. And too expensive and customers will shy away in the interest of their budgets. I always try to solve this by asking one of the questions: "So what?” or “And then?”. The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy around. Sellers are insufficiently aware of their real differentiators . 1. Differentiation strategy is one of the most important marketing strategy in today’s business environment.With so many brands and so many varieties of products and so much advertising noise, it becomes very difficult but ultimately very necessary to differentiate your brand from competition. The packaging just like branding requires that manufacturer is very careful because it comprises the first impressions the customer get about the product. Difficulty in the pricing of goods that are not new into the market. D. differentiation strategy is more likely to generate higher profits than is a low cost strategy because differentiation creates a better entry barrier. This can occur as buyers become more sophisticated; 3. However, this will definitely be of value for a company with global expansion plans. Well, very often this is a real eye-opener. The differentiation can be too extreme that the consumers don’t believe its credibility or they see it as an excessive luxury. Example of Focus Strategy. Strategic planning can yield less than desirable results if you end up in one of the possible planning pitfalls. Annual strategy: Strategy is only discussed at yearly weekend retreats. The best way to go about pricing is to have a market analysis of the prevailing market prices for the kind of good and products you want to launch to help you in deciding how to price your products. Teachers differentiate to help each child learn and progress with methods that are specifically tailored to the child's academic needs. Which of the following is not a potential pitfall of a differentiation strategy? The manufacturer often applies this tactic to ensure that the customer still buys their products because they have multiple choices from which the customer can pick from. The increased competition has divided the demand among different players in the market. Also, clients and prospects have more and better information at their disposal than before. Do they reduce the profit of the product and the business in the end? Pursuing a differentiation strategy requires a larger financial investment from the company, another weakness. Not a constructive discussion, because it is anyhow advisable to frequently validate and map your differentiators– and to check if everybody is still aligned. B. choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or worth paying for.. C. trying to charge too high a price premium for the differentiating features. Differentiation strategy. A pitfall to avoid in pursuing a differentiation strategy is: A. trying to differentiate on the basis of attributes or features that are easily and quickly copied. Definition: Differentiation strategy, as the name suggests, is the strategy that aims to distinguish a product or service, from other similar products, offered by the competitors in the market.It entails development of a product or service, that is unique for the customers, in terms of product design, features, brand image, quality, or customer service. Customers have different preferences on the price factor, too cheap and people will think the quality is poor. Customer relations means that you understand your customers and rather than just attending to them, you care about their wellbeing and thus you make follow-ups and give them a different experience that excites them and makes them feel both secure and important to you. View full document. The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy around. Customer relations also means that you are willing as the business manager to go out of your way to share the business goals and vision to the customer so they can feel like part of the business. Organizations that are able to avoid these 4 pitfalls, are measurably more successful. What is a differentiation strategy? The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy around. EXECUTION. ... It’s easier to avoid pitfalls when they’re clearly identified. o Too high a price premium. A. trying to differentiate on the basis of attributes or features that are easily copied. D. Perceptions of differentiation may vary between buyers and sellers. Buyers thus sacrifice some of the features, services, or image possessed by the differentiated firm for large cost savings; Buyers need for the differentiating factor falls. A poor customer relationship will lead to reduced profits while a good one will earn customer loyalty and ultimately lead to improved profits. A significant portion of the cost savings, achieved through incredibly efficient operations, are retained by the business and, therefore, become profits. Many organizations are stepping in one of the 4 pitfalls of differentiation. What are the steps to a good branding process? All rivals share a common input or raw material. B. choosing a product offering that supports buyer's indifference to rival brands' offerings. Firms that fail to attain both strategies may end up with neither and become stuck-in-the-middle. I more often than not work with organizations whose separate capabilities or services are not unique at all. Besides that, sellers not always have (or take) the time to get informed about the latest unique developments. It is no news that competition is getting more fierce and is coming from more and unexpected directions. Porter’s (1980) put forward three generic strategies i.e. Avoid bad pricing habits that lead to cut-throat competition and making it unfair to conduct business for others. Recource MP&S Ch. User convenience results in the creation of customer loyalty leading to a returning customer. A. Buyers need for the differentiating factor falls. Not opening up meaningful gaps in quality, service, or performance features vis-à-vis the products of rivals. Short termism Marks & Spencer fell prey to this in the late 1990s when it announced its target of becoming the first UK retailer to generate annual profits of £1bn. As a product remains in the market for longer consumers become smarter about the prices and thus the premium charges being charged can no longer be sustained. The choice of price determines the level of sale but poor pricing is the first avenue to business failure. These companies use advertising to show consumers the differences. We ensure findings and ideas are discussed with the people who will implement them to collaboratively ensure alignment. However, you should evaluate the profit margin of the product to ensure you do not end up making losses. All rivals share a common input or raw material. Unfortunately, there was a high price to pay. A company having a better product compared to its competitors can carve out its place in the business community. Through differentiation at the product level, different brands from different businesses can easily be identified by the consumer. Firms can create long-lasting reputations and earn customer loyalty by producing higher quality products. Differentiation strategyalso involves a series of risks: 1. One of the mistakes most businesses do is to over widen their target market scope to the extent that they overstrain their distribution resources. A. trying to differentiate on the basis of attributes or features that are easily copied. B. choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or worth paying for.. C. trying to charge too high a price premium for the differentiating features. Inventions are not easy to come up with and require a budget to be implemented but it provides a unique product into the market. Perspectives to pinpoint market opportunities and assess your options charging a premium for. 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