Differentiator or Cost Leader

Michael Porter said you could either be a "differentiator" or a "cost leader", and most everyone since has agreed with him.

But what do you do with Samsung and Wal-Mart?

Samsung was exclusively a cost leader for years, but now is known for quality products. Their cost leader business strategy only accounts for a percentage of their business, while their real business is in quality R&D and production.

Wal-Mart is similar. The bakery at Wal-Mart (I know I keep referring to it, but it is spectacular) is known for quality, as are the great value brand items. So while Wal-Mart specifically targets consumers using the cost leader strategy, they are also a differentiator.

The truth is, the world isn't black and white. You have to select where and when to use specific marketing strategies for specific segments, and a similar event occurs with your business strategy.

There is no real case of a differentiator transitioning into a cost leader, but it is common to see a cost leader transition into differentiation: Toyota, Samsung, Wal-Mart, and others are well known examples of this.

So what does all this mean for your business?

Ask yourself these questions:
Who are our customers?
What is our business strategy? (Differentiation or Cost Leader)
What value does our product/service bring?

These questions ought to be in the back of your mind when you do anything, or plan anything. Simply because if you are a cost leader, and your strategy for a particular segment is to market as a differentiator, you may have some issues being successful.

A current example might be Kia's attempts to create a luxury car. Kia is seen as a cost leader in the United States, yet they attempt to sell their new line of cars as luxury.

Contrast this when Toyota brought luxury cars to the States, they separated their Toyota brand from a new luxury brand called Lexus. It was highly successful.

This is called "fit", and it is a comparison of your planned strategy with your currently used and customer understood strategy. If it doesn't "fit", then drop your planned strategy.

There are other questions to ask, and other ideas to brainstorm about, but keep reading... maybe we'll get to it soon!

Francis Trascritti