Competitive Advantage and Differentiation

Marketers do not want their products perceived as commodities—but there is sometimes no difference between your product and your competitors’ products in the eye of consumer. In these situations, price becomes the only differentiator.

Competitive advantage means that a firm has a marketing mix that the target market sees as better than a competitors’ mix. It may be the result of efforts in different areas of the firm-cost-cutting in production, innovative R&D, more effective purchasing of needed components, or financing for a new distribution facility. Whatever the source, the crucial test of an advantage is if it allows the firm to provide superior value and satisfy customers better than competitors.

A marketing mix must meet the needs of target customers, but a firm isn't likely to get a competitive advantage if it just meets needs in the same way as some other firm. So, in evaluating possible strategies the marketing manager should think about whether there is a way to differentiate the marketing mix.

Positioning refers to arranging your product in a way to occupy a clear and distinctive place in customers’ minds in comparison to competing products (e.g., BMW means luxury car). Effective positioning begins with differentiation.

Differentiation means offering a marketing mix that is distinct from and better than what is available from a competitor. Differentiation often requires that the firm fine-tune all of the elements of its marketing mix to the specific needs of a distinctive target market. Sometimes, however, the difference is based mainly on one important element of the marketing mix-say an improved product or faster delivery (e.g. your product might include a built-in safety feature).