Differentiation is one of the classic Porter strategies and it means creating an offering that is percieved as unique in a way that is superior to competitive offerings. This allows the price point to be more flexible as customers show more brand loyalty.

Costs to differentiate usually include core competencies in market research, product development, creativity to innovate, distribution channel network, marketing skills, ability to communicate the importance of the unique selling proposition, and the ability to attract highly skilled, creative people.

Cost effective differentiation adds value by helping customers save decision making time and increases the overall value of the brand, relationship or association of the customer to the brand becomes a strong competitive advantage because to best it, a rival cannot merely invest in an obvious feature, but must work against a non-concrete invisible barrier.

Cost effectiveness is critical because one can spend their entire budget and not see results for years. Reputation building is not an exact science and takes its own path in nearly every case. The timing is not precise or exactly predictable in any given situation. Strategic, well planned and executed differentiation endeavors that are attached to accurate customer needs and marketplace data are effective, yet can be estimated, not forecasted definitively in terms of timing.

Ways to determine how to best differentiate include:

1. Compare and contrast to competitors by doing secondary research. Look at competitors’ products, placement, pricing and promotions. Syndicated data as available is always a solid basis from which to conduct primary research. Neilsons, JD Power and Associates and leading industry trade periodicals of company rankings for product categories and type are generally reliable.

2. By doing primary research:

a. Observe the market place and customers as they choose and purchase – go watch or set up focus field studies and interview and observe customers choose and purchase

b. Talk to and observe sales representatives about your goods or services versus the competitors.

Ask sales reps to give you their perception of customer preferences and why.

Tip on acquiring feedback from the sales reps: If you can ask the best reps, your results are likely to be more accurate and more helpful. If it is possible to determine which reps are the best, it is worth the extra effort in selection. Keeping questions relatively standard will also yield more accurate and helpful results if more than one individual is conducting the research.

3. Look at your brand’s placement in the market, i.e. ranking in search engines if online, placement and proportion of shelf space if in stores, and in trade magazines to get a better idea of the level at which your brand is established and in demand.

From your continual research, assessment and monitoring your products and the market, you can more easily spot opportunities to build your differentiation abilities and values.

For more on Michael Porter's classic differentiation strategy see the original references: Porter M. (1980). New York: Free Press, and the Institute for Strategy and Competitiveness, Harvard Business School at www.isc.hbs.edu.