E-Marketing, 3rd edition Chapter 9: Differentiation and Positioning Strategies
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?
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