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Differentiation strategy

Involves making the product or service look distinctively different to those of competitors in the eyes of the customers, and in ways valued by customers. The aim of differentiation is to either: increase profits by charging a higher price (which should more than cover the extra costs incurred in offering a more unique product / service); or increase market share by offering a better product/service than rivals, at the same price. There are two main sources of differentiation: Actual (physical) advantages such as: improvements in design leading to better performance and / or appearance; additional features eg CD player or rear windscreen wipers in cars; better quality materials possibly increasing life of the product or taste as in the case of food; better packaging; easier access – more convenient location; faster, more reliable delivery; after sales services eg guarantees, warranties. Perceived (psychological) advantages, ie the belief that one product is better than another when there are no significant physical / tangible differences. This is achieved through branding and advertising. For example, many advertisements, in particular TV, attempt to create an image about the company or product that the customer wishes to be associated with.

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