In Search of a Differentiation Advantage

Differentiation can be achieved in many ways, according to Kotler (2003, pp. 49-51):

·       Product (features, performance, conformance, durability, reliability, repairability, style, design)

·       Service (delivery, installation, customer training, consulting, repair)

·       Personnel (competence, courtesy, credibility, reliability, responsiveness, communication skills)

·       Image (symbols, written and audio/video media, atmosphere, events)

while he additionally notes that “The customer may have developed a satisfying relationship with one of the suppliers. We call this Relationship Differentiation”. He also suggests (2003, pp. 167-168) Service Quality as one of “the promising sources of differentiation and distinction” and states that “Every business is a service business. You are not a chemical company. You are a chemical services business”.

Similarly, Robinson, Clarke-Hill and Clarkson (2002, pp. 149-166) propose (for chemical companies in commodity products) that “If firms in this sector wish to break out of the commodity trap of blind allegiance to cost leadership as a generic strategy, then they must seek methods of differentiation” and conclude that “a servitisation strategy placed in the context of relationship management can be a means of creating differentiation advantage in a traditionally cost oriented sector”, 

while Ulaga and Eggert (2006, pp. 119-136) seek the Value- Based Differentiation in order to achieve the Key Supplier status 

and Muthuraman, Gupta, Seshadri and Narus (2006, pp. 4-6 of 27), for another commodity sector (steel), seek the differentiation advantage through a process of transitioning to a Customer Value Management and thus forming a relationship of the supplier with the customer that creates and shares value, increases partnership and cooperation, trust and relationship retention, 

McCune (1999, pp. 45-50) proposes escaping the commodity trap via innovation, niche marketing, new markets, new product features, better service experience than competition, leveraging company’s strengths and building relationships and Barwise (1995, pp. 45-59) notes especially in business-to-business markets  “a growth of closer, longer term partnerships, between firms within the same value chain”, putting emphasis on product development, information exchange, interdependence of various processes and  increased competitiveness for the related parties, 

while Innis and La Londe (1994, pp. 1-27) agree as well that superior customer service leads to customer satisfaction, customer loyalty and market share.

A Differentiation based on Relationship Marketing for Commodity Products (through Service or other personalised experiences) is related with the Customer’s Perceived Value for the offering.

Rust, Zeithaml and Lemon (2000; 2004) distinguish three drivers of Customer Equity (with us focusing mostly on Relationship Equity):

·       Value Equity (the customer’s objective assessment of the utility offering based on perception of its benefits relative to its costs) – Its sub-drivers are Price, Quality and Convenience

·       Brand Equity (the customer’s subjective and intangible assessment of the brand, above and beyond its objectively perceived value) – Its sub-drivers are Customer Brand Awareness, Customer Attitude towards the Brand, Customer Perception of Brand Ethics

·       Relationship Equity (the customer’s tendency to stick with the brand above and beyond objective or subjective assessment of its worth – more important than the other drivers especially when products are less differentiated) – Its sub-drivers are Programs for Loyalty, Special recognition and Treatment, Community and Knowledge Building

Grönroos (1990) notes about the Perception Gap through his Perceived Service Quality Model between Customer’s expectations and Customer’s experiences. Marketing can influence both the expectations (communicating proper ones) and also the technical and functional quality of the offering (what and how) narrowing the gap.