E-Marketing, 3rd edition
Judy Strauss, Adel I. El-Ansary, and Raymond Frost
Chapter 9: Differentiation and
Positioning Strategies
© Prentice Hall 2003
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Differentiation of Online Businesses

Differentiation is what a company does to the product.

The keys to differentiating online businesses are:



The real value added by the Internet:



The creation of a distinctive and superior customer experience,
The development of one-to-one relationships with consumers.
Ability to differentiate according to customer relationships,
Provide a unique experience for each customer.
Kotler:


Defines “differentiation as the process of adding a set of meaningful and
valued differences to distinguish the company’s offering from competitors’
offerings.”
“A company can differentiate its market offering along five dimensions:
product, services, personnel, channel, and image.”
Differentiation of Online Businesses

Offline:


Differentiation emphasizes the product dimension.
Online:
 Differentiation by product.
 Advantages:



A greater assortment of products that companies are able to
offer
The ability to customize product offerings for individual
customers.
A powerful new avenue for differentiating by channel, services,
and image.
140
120
Online
100
80
60
40
Offline
20
0
Product
Services
Image
Channel
Relative Importance of Online and Offline Differentiation Dimensions
Personnel
Overview
Differentiation of Online
Businesses
Channel
Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Channel Differentiation


The Internet:
 = a distribution channel + a communication channel + a
relationship channel,
 Used to forge one-to-one relationships with individual
customers.
The Internet expands:

Companies’ geographic range + business hours +
assortment of products available
 The channel through which it can reach customers
+display a diversified assortment of offerings +
differentiate itself.
Channel Differentiation

There are multiple levels of online channel differentiation:





Product or service information online = advantage over
companies with no Web presence,
Exploits the Internet as a communication channel.
Commercial transactions online,
Exploits the Internets as a transaction and distribution
channel.
The differentiation of competitors’ Internet-related
service offerings.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service
Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Service Differentiation

Customer service:



The distribution of products ordered online:


Ability to receive customer feedback through e-mail 24 hours a day,
Ability to respond more rapidly to customer concerns.
A way to differentiate services from traditional companies.
Online services, such as online banking and securities trading:



Are becoming increasingly popular,
Are differentiated both by the features they offer and the service
consumption experiences.
Supplement traditional offline services, but replace the traditional offline
services.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image
Differentiation and the
Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Image Differentiation
and the Customer Experience
Image differentiation is strongly affected by the Internet.

Experience branding:



When a company differentiates itself by creating a
unique customer experience,
Increases customer loyalty & retention + produce
referral business.
“firms can greatly improve their ability to retain
customers, target key customer segments and enhance
network profitability.”
Image Differentiation
and the Customer Experience




Differentiation has to be built upon the ability to create
huge perceptual differences from other aspects of brand
positioning.
The Internet’s interactivity allows companies to respond
more quickly to customer requests.
The ever-increasing speed of the Internet allows companies
to communicate more quickly with current and potential
customers
Essential to retaining current customers and attracting new
ones.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product
Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Product Differentiation


Product differentiation:
 Includes customization and bundling,
 Offers a combination of products/services that the individual
consumer needs + at attractive prices,
 Supports one-to-one relationship building with each customer,
critical for a company’s long-term success.
Product packaging:
 Offline: packaging are design to appeal to consumers, be eyecatching, compete with other products on store shelves, and sell
the product.
 Online: consumers might require products with more utilitarian
packaging + products will be shipped from the distributor directly to
the consumer and thus never appear on retailers’ shelves.
Product Differentiation

Results:




Products don’t need the expensive, colorful packaging
for store display.
Products only need a size and shape that is functional
and useful for the consumer.
Packaging minimization will reduce waste and reduce
packaging costs.
Lower prices, or more reinvestment in higher-quality,
single-layer packaging enhancements.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Personnel Differentiation





In the past, personalized service and one-to-one relationships required
the interaction of skilled personnel.
Now, the Internet allows companies to “deliver their products and
services through low-cost channels that automate the process and
remove the expensive human element.”
Lower transaction & marketing costs = cost leadership advantage over
offline companies.
Cost reduction for the end user & higher levels of service.
BUT as more companies offer products and services online, this cost
advantage between online and offline operations will gradually shrink
over time.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer
Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Customer Relationship


The Internet has made pricing information widely available
to suppliers, customers, and competitors.

Reduces price differences between suppliers,

Reduces the importance of price competition and
increases the importance of differentiation.
Important to create brand loyalty and use the Internet to
build one-to-one relationships with customers.
Customer Relationship



Data mining is used to predict customer behavior+
differentiate product and service offerings for individual
customers = a way of fostering the one-to-one relationship.
BUT this can have the opposite effect of driving away
customers who object to providing their personal
preferences to companies online, or who unexpectedly find
a completely different customized experience every time
they visit a company Web site.
The solution = allow the customers the freedom to opt-out
and remain anonymous, or to provide personal information
for customization purposes.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service
Differentiation Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Product-Service Differentiation Strategies

Differentiation strategies:






Being the first to enter the market,
Owning a product attribute or quality in the consumer’s
mind,
Demonstrating product leadership,
Utilizing an impressive company history or heritage,
Supporting and demonstrating the differentiating idea,
Communicating the difference.
Product-Service Differentiation Strategies

E- marketing strategy revolves around the image and
product information available on the Web.


A strong brand image helps to attain “ownership” of a
product. (Amazon.com),
Customers are drawn to brands they trust, an attraction
that is enhanced by a positive company history.
Monster.com has essentially gained ownership of online
job searches.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Differentiation Strategies
Traditional strategies still apply to e-marketing.

BUT some differentiation strategies are unique to
marketing on the Web:

1.
2.
3.
4.
5.
6.
Site Environment/ Atmospherics
Tangibilize the Intangible
Trust
Efficiency and Timeliness
Pricing
CRM
1. Site Environment/
Atmospherics
(Watson et al. 2000)



Look and feel of site
User friendly
Accurate portrayal of
company and product
2. Tangibilize the
Intangible
(Watson et al. 2000)



Images
Virtual tours
Realistic descriptions
4. Efficiency and
Timeliness


Deliver what is
promised to customers
Deliver in a timely
manner
5. Pricing


Be aware of competitor
pricing
Potential customer
savings
Internet-Specific Differentiation Strategies
3. Trust


Clearly state privacy
policy
Use encryption for
secure transactions
6. CRM



Customer tracking
Seamless
communication
Greater relationship
efficiency
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Site Environment/Atmospherics



Atmospherics = the in-store ambiance created by brickand-mortar retailers.
Web sites can be differentiated by providing visitors with a
positive environment to visit, search, purchase, and so
forth.
Visitors want a site that:





Easily downloads,
Portrays accurate information,
Clearly shows the products and services offered,
Is easily navigated.
If customers like the home page, they will view additional
pages and ultimately become a paying customer.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the
intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Tangibilize the intangible


An online product or service cannot be seen except by an
image or description.
The goal: make offerings seem more tangible by showing
them in a realistic and customer-friendly manner, using:
 Virtual tours,
 3-D images,
 Product image enlargements,
 Trial downloads,
 Customer reviews.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Build trust

Trust = a key issue on the Internet:



Customers are expected to pay online,
Their information is tracked for personalized service or supply chain
management.
Trust-building should be an integral part of a Web site’s marketing
strategy.

Trust may be built in as a by-product of strong brand recognition:

Company sites with lower brand recognition must project a secure
environment:



Clearly define company’s privacy policy+ strictly enforced it
Use a safe and encrypted payment process for transactions.
A live person can be contacted if customers encounter problems on the
Web site, require personal assistance, or need to exchange or return a
purchase.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely
order processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Efficient and timely order processing



One of the strongest motivators for customers who make
Web-based purchases is the ease of ordering.
Organizations must market their alliances and delivery
timeliness as an important benefit.
By following its promises, the company will build customer
loyalty + receive referrals from satisfied customers..
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Pricing





Pricing as a method of differentiation has come under
scrutiny.
When products were first offered on the Web, companies
tended to offer price discounts as an incentive.
Today, prices are relatively comparable on the Web.
The majority of firms are choosing to differentiate
themselves using methods other than pricing.
Pricing is easy to imitate and non-price differentiation is
more enduring for all but the price leaders.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Customer Relationship Management



Price is less used for differentiation + barriers to entry decrease on the
Internet,
customer relationship management is becoming more predominant as
a means of differentiation.
Netflix rent movies on DVD by mail:




Customers set up personal lists of the movies they want to rent.
Customers can rent three or more DVD movies at one time—with no return
deadlines or late return penalties.
After viewing a movie, customers slip it into the prepaid return envelope to
mail it back to Netflix; a few days later, they receive the next DVD on their
list.
Netflix builds customer relationships one at a time through customerdriven personalization and convenience.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Other Strategies


“E-Marketing Opportunity Model” developed by Feeny helps
companies define their customers and products in order to
determine the degree of differentiation required.
3 e-marketing opportunities:




Enhancing the selling process,
Enhancing the customer buying process,
Enhancing the customer usage experience.
Firms use perceived product differentiation and frequency
of purchase to choose the best strategies.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Positioning Strategies

Positioning:




Help to create a desired image for a company and its products in
the minds of a chosen user segment,
Concerns brands, the company itself, or individual products,
Help to control brand image.
The concept is simple: To be successful, a company must:


Differentiate itself and its products from all others,
Position itself among its competitors in the public's mind to carve
out its own market niche.
Positioning is the process of creating this image.
A position is the resulting view of the firm or brand from the
consumer perspective.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on
the Web
Repositioning on the Web
Bases for Positioning on the Web

Firms can position on the basis of:






Product or service attributes (“the smallest cell phone”),
High-tech image (“our cell phones handle e-mail”),
Benefits (“fits in your pocket”),
User categories (“best cell phone for college students”),
Comparison with competitors (“our phone is less expensive than the
Nokia”),
Take an integrator position (“a full range of electronic products and
services”).
Product or Service Attribute




Attributes = product or service features such as size, color,
ingredients, speed, and so forth.
A patented product or process, such as Amazon’s one-click
check-out process, is an idea basis for positioning.
iVillage allows users to build their own meal menus at its
site using criteria such as ingredients and calorie counts.
(www.ivillage.com)
Pillsbury adds value through ideas, recipes, an advice
service on its site (www.pillsbury.com).
Technology Positioning



Positioning on the basis of technology shows that a firm is on the cutting.
At the Lands’ End Web site:

Women can build virtual models based on their physical features such as
hair color, skin tone, hair style, and face shape.

Users can then see how Lands’ End apparel would look on themselves by
trying virtual outfits on the model. The model can be rotated for front, side,
and back views.
The American Airlines site:

Offers various tools to allow customers to manage their flight
arrangements: Frequent flier account management, personalized travel
planning, and personalized seat selection when booking flights.

Customers can store user-profile information on preferred destinations,
seating preference, companion travelers, and frequent flier rewards status
and billing.
Benefit Positioning

Benefits:



The Polo Web site:



The flip side of attributes—the customers’ perspective of what the feature
will do for them.
This positioning is generally a stronger basis because of its customer
orientation.
Focuses on how its products shape an entire lifestyle.
Its products are designed to help customers contemplate a dream world of
adventure, style, and culture.
The Miller Lite Beer Web site:


Offers a software package that can be downloaded and used as a social
organizer for arranging meetings, mostly for entertainment.
The Miller icon is then permanently present on the desktop, reminding the
customer about the brand on a daily basis.
User Category

This positioning relies on customer segments.

It is successful when the segment has some unique quality that ties
product benefits more closely to the group than to other segments.

Kellogg’s:



The company has set up an interactive Web site for children,
They can register online and enter code numbers found on Kellogg’s cereal
packages, then use the codes as “money” on related Web sites or even
earn interest in a “special” bank.
Yahoo! Geo Cities:


Hosts Web user pages that are organized into neighborhoods based on
specific interests.
Consumers can connect with others who share the same interests.
Competitor positioning


Many firms position by touting specific benefits that provide
advantages over competitive offerings.
Online or offline companies often position themselves:
 Against an entire industry (“I Can’t Believe It’s Not
Butter” margarine),
 Against a particular firm (Amazon.com for toys),
 According to relative industry position (AOL is the ISP
connection leader and Earthlink a challenger).
Integrator Positioning

Some companies want to be known for providing
everything a consumer needs in a particular product
category, industry, or even in general (e.g., Wal-Mart).

This is a particularly important strategy online because
busy consumers want convenience and one-stop shopping.

Martha Stewart’s Web site:



Brings together a wide spectrum of business units in one place,
Effectively communicates the core identity of the brand—improving
the quality of living in the home and encouraging do-it-yourself
ingenuity,
Is linked to Kmart’s site, where Martha Stewart’s branded domestics
products are sold.
Overview
Differentiation of Online
Businesses
Channel Differentiation
Service Differentiation
Image Differentiation
and the Customer Experience
Product Differentiation
Personnel
Differentiation
Customer Relationship
Product-Service Differentiation
Strategies
Differentiation
Strategies
Site
Environment/Atmospherics
Tangibilize the intangible
Build trust
Efficient and timely order
processing
Pricing
Customer Relationship
Management
Other Strategies
Positioning Strategies
Bases for Positioning on the
Web
Repositioning on the Web
Repositioning on the Web

Positioning alone won't make a product successful.

Marketers must also be sensitive to how the market
perceives and views the company and the product.

Based on market feedback, a company must be flexible
enough to react to those opinions by enhancing or
modifying a position.
Repositioning on the Web


Repositioning:
 Is the process of creating a new or modified brand, company, or
product position.
 Is a long-term challenge when attempting to change the way
customers perceive their brands.
 Companies can easily check on progress by tracking customers'
preferences and habits on the Internet.
Amazon has repositioned itself within the last few years:
 Originally Amazon was positioned as the world’s largest bookstore.
 Today it promises the “Earth’s biggest selection” of a variety of
products from music to electronics and more.
Key Terms
• Atmospherics
• Differentiation
• Position
• Positioning
• Repositioning
Review Questions
1.
2.
3.
4.
5.
6.
7.
How does differentiation differ from positioning?
What levels of online channel differentiation
exist as options for companies?
What is the goal of experience branding?
How do site atmospherics affect online
differentiation?
Why should e-marketers try to tangibilize the
intangible?
Why is benefit positioning so powerful?
Why would an e-marketer choose to use
competitor positioning? Integrator positioning?
Discussion Questions
1.
2.
3.
4.
Why is a company able to directly control the
differentiation of its brand but not its positioning?
The positioning rule of thumb states that “Mediocrity
deserves no praise.” What does this mean? Do you agree
with this statement? Explain your answer.
How might an online company react if a rival embarks on
competitor positioning in an unflattering way?
Are customers likely to be confused by an integrator
positioning that suggests a Web site sells anything and
everything? What are the advantages and disadvantages
of this positioning?