Wednesday, November 24, 2004

Generification versus Differentiation

Generification: The condition occurring when products serving a specific market segment change to become similar to one another.

Generification is not a word you will find in the dictionary. None the less, it is a phenomenon that is occurring in an increasing number of markets around the world.

Generification is a result of a blurring of the lines that allow one product to be easily distinguished from its competitors. Today, very few industries are able to escape this market trend. In the automotive world, sedans are all starting to take on a look of the European cars with rounded edges and sleek lines. Clothing designers have traditionally followed “industry” trends when it comes to colors, lengths and fabrics. Not even the drug industry can escape this trend as the spam mail for various disfunctions will attest.

So what is a company to do in order to boost its market share in a “me too” world?

Too often, financial incentives are the first choice for both holding and building market share. Financial incentives can provide a short term competitive advantage though as the automakers have found out, if you continue to offer these incentives too long, consumers learn to withhold their purchases until the incentives are big enough. No incentives quickly equates to no sales. Financial incentives, easily duplicated by all competitors, offer little in the way of escape from generification.

Some companies prefer to put marketing dollars into “consumer education” initiatives designed to highlight the differences between one product and another. The Internet makes validating these “claims” very easy yet hurried consumers often have little time to conduct any supporting research. Thus the subjects of trust and brand loyalty come into play. When 2 companies make the same claims about their products, who do you trust?

Brand loyalty is not something that can be controlled by a formula. At least, I have never read nor heard of anyone who has found the magic formula for instant brand loyalty. Brand loyalty is the product of a number things one of which is superior customer service.

Today, customer service is more than just being nice to every customer. It’s about tailoring the experience to suit the needs of the individual customer. It’s about recognizing loyal customers with special treatment. It’s about recognizing that big spenders have a different expectation than the small spender. It’s about recognizing that not all customers are created equal and providing customer service accordingly.

Airlines have segmented their customers for years through frequent flyer programs. The more you fly, the better the treatment you receive. Nothing is quite as generic as an airline seat. Car rental agencies have done the same.

Retailers have worked to integrate their Internet efforts with their retail locations but few have been successful outside of simple product return policies. Where’s the frequent shopper program that tracks my activity and rewards me for loyalty regardless of channel?

No industry today is immune from the effects of generification yet successful companies continually find ways of differentiating themselves from the competition. Customer service that targets customers with personally tailored offerings is one of the best tools for building customer loyalty, holding on to and building the customer base and standing out from the crowd. In fact, tailored customer service is one of the few products that produce lasting advantage that are very hard to duplicate.

Take a look at your company and its “generic” products. What makes you different from your competitors and what portion of that differentiation comes from a tailored customer service program?