Differential advantage refers to a set of unique features, benefits or characteristics of a firm or a business which sets it apart from its competitors for its target market. It differs from comparative advantage where a firm has an upper hand over its competitor in a directly comparable feature and is a relatively more subjective measure.
Full Answer
What is differential advantage in economics?
Differential advantage allows firms to charge a premium for its offered products or services as the customer does not only recognizes the advantage but also finds it useful enough to pay extra price for it.
How do you achieve a differential advantage with advertising?
A differential advantage can be achieved by the creative use of advertising. Advertising can aid differentiation by creating a stronger brand personality than competitive brands. Using more creative sales promotional methods or simply spending more on sales incentives can give direct added value to customers.
How can differential advantage be used to identify target markets?
In addition to discovering and deploying new competitive edges against your competitors, differential advantage can also be used as an analysis tool to identify target markets for a particular product or service based on the benefits a customer will enjoy by giving your company their business.
What is the difference between product-based and market-based differential advantage?
In health care, the establishment of a product-based differential advantage is difficult. The pace of technological change is such that the advantage goes to competitors who have the resources to acquire a new technology. A market-based differential advantage is available to those who focus on a particular market segment.
What do you mean by differential advantage?
the element or factor in a firm's product or strategy which makes it superior to that of a competitor.
What is an example of a differential advantage?
Here are some examples: Faster and/or more thorough customer service. More accessible products or services. More expertise.
How is a differential advantage important in marketing?
Differential Advantages. A comparative advantage is a company's ability to produce its product or service at a lower cost than the competition. A differential advantage aims to create different products and services from its competitors that are seen to be superior.
How can differential advantage be created?
A differential advantage can be achieved by the creative use of advertising. Advertising can aid differentiation by creating a stronger brand personality than competitive brands. Using more creative sales promotional methods or simply spending more on sales incentives can give direct added value to customers.
What are the 3 types of competitive advantage?
There are three main types of sustainable competitive advantage: differentiation, cost leadership, and focus advantage.
What is Channel differential advantage?
Differential advantage: Also called sustainable competitive advantage, this refers to a firm's attainment of an advantageous position in the market relative to competitors – a place that enables it to use its particular strengths to satisfy customer demands better than its competitors on a long-term (sustainable) basis ...
What is the disadvantage of differential?
Disadvantages: A locked differential will not allow for wheel speed differences between the right and left wheels. This means additional tyre wear, as well as binding within the drivetrain as a result.
What is Amazon's competitive advantage?
Range, price and convenience are placed at the core of Amazon competitive advantage. The global online retailer operates with a razor thin profit margin and succeeds due to a combination of economies of scale, innovation of various business processes and a constant business diversification.
What is competitive advantage and why is it important?
A competitive advantage enables a company to perform better than its competitors. It refers to factors allowing a company to produce services or goods better or for less expense than the competition, which may generate more sales or higher profit margins.
What are the 4 competitive advantages?
The four primary methods of gaining a competitive advantage are cost leadership, differentiation, defensive strategies and strategic alliances.
What is the difference between a comparative advantage and a differential advantage to a particular company?
A comparative advantage doesn't mean that a firm creates a better product. Instead, it means a firm creates the same product at a better value (i.e., lower price). A differential advantage means a firm's products are viewed as higher quality and more unique compared to its competitors.
What are the 4 competitive strategies?
4 Types of Competitive StrategiesCost leadership strategy. It suits large businesses that can produce a big volume of products at a low cost, and that is why Walmart implemented this strategy. ... Differentiation leadership strategy. ... Cost focus strategy. ... Differentiation focus strategy.
What is the advantage of focus strategy?
While many competitors try to sell as many products to as many customers as possible, a focus strategy picks one or more specific segments. It gains an advantage by offering either high quality or low cost to that segment. These efforts can increase customer loyalty.
What is the meaning of cost advantage?
the competitive edge which can be gained by one company over another by reducing production or marketing costs or both so that it can offer cheaper prices or use excess profits to bolster promotion or distribution.
What are the 3 levels of the product explain each?
The Three Product Levels. In order to understand a product better, Kotler proposed examining each product as though it were actually three separate products – the core benefit, the actual product, and the augmented product. Together, these three separate products are known as the Three Product Levels.
What is differential pricing?
a pricing strategy in which a company sets different prices for the same product on the basis of differing customer type, time of purchase, etc; also called Discriminatory Pricing, Flexible Pricing, Multiple Pricing, Variable Pricing.
Differential Advantage Details
Companies occasionally analyze their competitors' weaknesses to turn those weaknesses into their own strengths, eventually increasing their market share. In many cases, they may only focus on comparative advantage - for instance, by offering lower prices - but this is usually not enough.
Differential Advantage Real World Example
When encountering the concept of differential advantage for the first time, people usually focus on better quality. The quality of any product or service is crucial to its success. Still, differential advantage is more related to the overall customer experience than just one feature, therefore making it more effective.
Significance of Differential Advantage
Differential advantage is important to a company that wants a market share and a market in which they dominate. After all, shoppers are usually always all about advantage. When looking to buy something, they will compare different products or services and get what they think benefits them the most.
Types of Differential Advantage
Skills and resources become differential advantage only when the customer perceives their added value. There are three key types of differential advantages through which a company can provide benefits to its customers. These are:
Difference Between Differential Advantage and Comparative Advantage
Differential advantage and comparative advantage are the two kinds of competitive advantages a company may have over its competitors. As mentioned, differential advantage is a unique feature about a product or service that consumers think is superior. This ultimately drives them to patronize it, even at a higher price.
What is differential advantage?
Differential advantages are those factors in which a particular organization excels or has the potential to excel over competitive organizations. A differential advantage is different from a competitive advantage in that a differential advantage does not have to meet the four conditions required for having a competitive advantage. A differential advantage exists whenever one firm 's strength exceeds that of its competitors along some dimension. Differential advantages may be found in the following areas :
What is product based differential advantage?
Product- based differential advantage is one in which the company has a unique technological capability or clinical expertise that allows it to establish a competitive position. In health care, the establishment of a product-based differential advantage is difficult. The pace of technological change is such that the advantage goes to competitors who have the resources to acquire a new technology.
What is a sustainable advantage?
Sustainable means an advantage that is not easily copied by competitors. That is, the business creates barriers to entry, for example by developing in outstanding reputation or image for quality, service or reliability.
1. Future customer obsession
It may sound obvious but a healthy obsession about market opportunities and customer behaviours is a good thing. And, it's absolutely necessary if you want to develop great value propositions.
2. Relentless focus on opportunity
A starting point for a quantified value proposition is a quantified and qualified market opportunity. Simply put, from a business perspective there has to be a 'pot of money' to chase, that's at least in prospect could have reasonable returns.
3. Clear strategic alignment
All value propositions need to be aligned to business, marketing and customer strategies. These strategies prioritise market opportunity and determine which value propositions are more or less attractive. To do this effectively, they must be quantified.
4. Sources of value
Businesses have many sources of value, often more than they realise. The trick is to prioritise these sources of value or 'value assets' with respect to specific market opportunities and their importance to specific customers. It's where customer needs analysis meets business capability, competency and capacity.
5. Understanding customer relationships
While positioning is strictly speaking a different discipline, value propositions cannot be completed without considering current and future customer relationships.
6. Integration with customer experiences
Value propositions need to 'talk to' customer experiences, they need to have relevance at specific touch-points and grasp 'mind-share' in decision makers at specific times. This means targeted communication of specific aspects of the proposition, modularising propositions and their communication to particular audiences.
New CEO agenda to grow shareholder value
New ways for businesses leaders to maximise growth, revenue, cash flow and capital asset value.
What is differential advantage?
A differential advantage can be created with any aspect of the marketing mix. The key to deciding whether improving an aspect of marketing is worthwhile, is to know if the potential benefit provides value to the customer. Contents [ show] Product. Distribution.
When is a competitive advantage translated into a differential advantage?
Although skills and resources are the sources of competitive advantage, they are translated into a differential advantage only when the customer perceives that the firm is providing value above that of competition.
How can advertising help differentiate?
Advertising can aid differentiation by creating a stronger brand personality than competitive brands. Using more creative sales promotional methods or simply spending more on sales incentives can give direct added value to customers.
Can a low price be used to gain differential advantage?
Using low price to gain differential advantage can fail unless the firm enjoys cost advantage and has resources to fight a price war. Credit facilities and low interest loans are indirectly low prices. A high price can be used to do premium positioning. Where a brand has distinct product, promotional and distribution advantage, a premium price provides consistency with the marketing mix.