This lesson provides an overview of the value of differentiation,
as well as the different types.
By the end of this lesson, you should be able to:
- Understand the value of differentiation in the Sri Lankan tourism industry, particularly in the East.
- Identify types of differentiation within your tourism business's competitor set.
What is product differentiation?
Product differentiation is a marketing process of differentiating an offering (product or service) from others in the market, to make it more appealing to the target audience.Simply put: It's about standing out. It's about being remarkable: doing something that others remark on.
Does that sound complicated? Here's a useful little video that should convince you that being different makes good business sense. It's based on a great book by legendary marketing guru Seth Godin called Purple Cow. (By the way, if you really want to learn about marketing, subscribe to the daily updates from Seth's blog - daily little bits of inspiration and good advice from the world's marketing master.)
Product differentiation involves:
- What? Defining the offering's unique position in the market by
- How? Explaining the unique benefit it provides
- To whom? To the specific target group.
Why is defining your USP so important?
Defining your USP is important because it translates the product attributes you offer into benefits for your customer:- It answers the potential buyer's biggest question: 'What's in for me?'
- It gives the customer a reason to want to pay for your tourism product or service - and quite probably be prepared to pay more than they would elsewhere - and repeat the purchase or tell their friends about it.
- It focusses the customer on the benefits you're offering rather than simply on the price.
Product differentiation types & factors
Differentiation depends on customer perception. It's not how the business sees its product, it is how the customer sees the product. What are you offering that potential customers will notice and want to tell other people about?A product can be differentiated based on:
Price
The price is the most common determinant of which target group will be attracted to a brand's product. It separates a premium product from economical products. Example: You can differentiate yourself from the guesthouse next door by being cheaper.Features
Features like size, shape, ingredients, origin, etc. differentiate products in the same price spectrum. For example, you can differentiate your guesthouse from the one next door by including a special breakfast or highlighting your family's history in the district.Performance & quality
A good quality product always stands out from standard quality products. For example, cleanliness: guests will frequently comment in reviews about how clean a place is. You might not have better facilities than the guesthouse next door, but if you are always perceived to offer cleaner and fresher rooms and facilities, you can stand out from the crowd.Reliability
Some products are known to be more reliable than others. Guests will often comment in their reviews about how reliable the marketing was: that the guesthouse offered exactly what it promised to in its promotions. Do you serve what you say you do on your menu or are some of the items often unavailable?Looks
Looks play a very important role in differentiating the product: is your style very traditional and culturally rich? Is it modern and trendy? Do you have a specific colour scheme? (Remember that we are not saying one of these is better than the other - we are suggesting that it's a way to be different, and to be remembered.)Channels of distribution
Channels of distribution also plays a vital role in differentiating a product from the competition. For example, do you enable your guesthouse to be found on Booking.com or are you reliant on people driving past and seeing your signage?Location
This is often the key component in differentiating yourself in the travel industry: is your guesthouse close to the most popular beaches? Is it at the edge of a quiet beach? Or set within a forest?Marketing efforts
Marketing efforts give rise to the brand image which is a decent product differentiator.Summary
Besides being an imperative for survival in the competitive market, product differentiation has the following advantages:Creates value: Product differentiation gives a reason to customers to choose your business and brand over others.
Helps in defending high prices: Your brand's USP gives customers a reason why they should be willing to pay more.
Creates brand loyalty: A successful differentiation strategy creates brand loyalty among customers - your domestic tourists are likely to return more often, and your international inbound tourists are more likely to tell others about you and provide great reviews.
Creates a perception of no close substitutes: A successful product differentiation strategy may create a perception among the customers that there isn't any substitute available in the market. That your business is unique.