Defining Product Differentiation
Our Chapter 7 discussion will cover product differentiation and how it can set a company apart. For Nordstrom, product differentiation is critical to the brand’s image. But what is it exactly?
Product differentiation is defined as a business strategy whereby firms attempt to gain a competitive advantage by increasing the willingness of customers to pay for the products or services they sell. Attempts to increase this willingness to pay are often made by altering the objective properties of those products and services. Additionally there is a wide variety of ways that a firm can attempt to differentiate themselves from other company’s in the industry. These different ways are known as the bases of product differentiation and their purpose is to create the perception that a firm’s products or services are unusually valuable.
Nordstrom focuses directly on relationships between itself and its customers and links between itself and other firms. Further exploring these unique relationships, Nordstrom takes things a step further by focusing on product customization, consumer marketing, and product reputation. Nordstrom is well-known for having its own brand of designer clothing such as Zella and Treasure & Bond, but it also serves as a one-stop shop for people seeking high-end fashion from a wide variety of brands under one roof. If you’re shopping for a pair of Gucci slides to hit the beach, but also need a new pair of amazing Chloe espadrille wedges for a sunset dinner after a long day by the water, you shop at Nordstrom. Oh, and you need to re-stock on make up before your big trip, stop by the beauty counter, too.
Additionally, Nordstrom takes the cake for sustained competitive advantage in product differentiation on the bases of consumer marketing and product reputation. Have you ever gotten on instagram at any point in time during the last two weeks of the month of July? If so, you’ve probably heard about it, seen an ad for it, or maybe even shopped it yourself. What is “it”? The Nordstrom Anniversary Sale.
Nordstrom has totally capitalized on the idea of influencer marketing by establishing an amazing product and brand reputation with famous instagram influencers who have the ability to reach thousands of people at one time at any moment of the day. You’d think its the Super Bowl of the fashion industry… But hey, they’re doing something right. Up until last year, I had never even heard of such a thing as the Nordstrom Anniversary Sale, but the power of social media and consumer marketing took me by storm when I started following a few of my favorite bloggers on instagram. The next thing I know EVERYONE is talking about it.
Lastly, Nordstrom really capitalizes on its ability to attract customers through this amazing sale where hundreds of high-end brands are marked down to nearly a steal. This creates the foundation for that relationship that is so critical to Nordstrom’s competitive advantage for product differentiation. But even after the fact, Nordstrom does an amazing job at maintaining these relationships by continuing to offer periodic sales on its most popular items. Using influencers allows Nordstrom to take full advantage of the benefits that come with trusted product reputation without having to work too hard to “sell” the products that they carry. In the influencer world, if Dede says that Steve Madden’s new summer sandals are the most comfortable pair of sandals she owns, or that the new Rachel Parcell floral pretty dress would make the perfect choice for a summer bridal shower, all of her followers will most certainly take her word for it, and Nordstrom didn’t even spend one pretty penny on that nearly invaluable asset that is consumer marketing.
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