The Human element the heart of Business
Differentiation Strategy in the retail industry
Planning for small businesses is a must in a very competitive environment where success is achieved through creating competitive advantages. These competitive advantages must be unique and hard to copy. Differentiation strategy is one of the best business strategies; particularly in the retail industry.
When exploring business strategies, Michael Porter’s strategies come to mind first. Particularly, Cost leadership and Differentiation. Cost leadership emphasizes producing standardized products at a low per-unit cost for consumers who are price sensitive (David, F. & David, F., 2017). Differentiation is a strategy aimed at producing products and services considered unique to the industry and directed at consumers who are relatively priced insensitive (David, F. & David, F., 2017).
Creating an Amazing Customer Experience
Although Cost leadership is one of the strategies that are widely used in the retail industry particularly within the EDLP (Every Day Low Prices) retailers, it is most associated with some type of differentiation strategy. Wegman’s, for example, provides consistent lower prices…In addition to store service features, such as cooking classes, freshly prepared foods, and gourmet food cafés ( Dinesh et al, 2008).
Retail businesses spend more of their investments on creating an amazing customer experience. It is this customer experience that presents unlimited creative opportunities for managers to take differentiation to a whole different level. Design, social setting, and ambiance influence shopping behavior (Baker et al, 2002). Store characteristics that highlight service facets- offering a bank inside the store…provide value to customers and distinguish the store from competitors (Kumar and Karande, 200).
Creating Emotional and Cognitive Reactions
Retail environments are sensory, creating emotional and cognitive reactions in shoppers through sight, smell, sound, and touch (Kayina &Goel,2015). Environmental elements such as lighting, music, window dressing and layouts, architectural design, freshness and fragrance, appropriate temperature, soothing and trendy color, attractive logo, and gentle crowding are ideal conditions that can affect the current and future behavior of consumers in a retail setting (Smith and Burns, 1996). These environmental elements create a more engaging, satisfying, emotional, memorable, enjoyable and convenient retail experience for customers, resulting in being differentiated over competitors (Burke, 2005; Kumar et al., 2010; Dahlhoff, 2013).
It is All About the Love of Serving Others
Retail stores must differentiate themselves from completion. Price strategies alone are not enough. Particular attention should be given to the uniqueness of the differentiating elements. They must be hard to copy. Although store design and layout along with all other creative ideas to create emotional bonding with customers are important, the human element stays the best creator of this bounding.
Retail is a people business. Retail employees need more than selling skills. It is all about the love of serving others. Unless retail owners invest in human development and aligning employees personal purpose with that of the retail store, this will remain a big challenge.
Otherwise, store employees will be very unique and almost impossible to copy a competitive advantage. This will then be the best differentiation element that will make a whole lot of difference.
Barney, J. & Hesterly, W. (2019). Strategic management and competitive advantage: concepts and cases. New York: Pearson.
David, F. & David, F. (2017). Strategic management: concepts and cases; a competitive advantage approach. Boston: Pearson.
Dinesh, G. , Minakshi, T. ,and Dhruv G. (2008) “ Understanding the determinants of retail strategy: an empirical analysis”, Journal of Retailing 84 (2008) pp 256-267
Kayina Hriiyiphro and Goel Sushma (2015) “Stimulating emotions as a strategy for an enhanced retail experience”. International Journal of applied Home Science, Volume 2 (11&12), November & December (2015): 264-267