How do companies in this industry differentiate themselves from one another?

Blog # 3

Sofia Klotz

10/23/2012

       How do companies in this industry differentiate themselves from one another?

Differentiation is one of the most important aspects of marketing for any company. If you are not able to differentiate your business from that of your competitors there is nothing stopping your customers from taking their business elsewhere.  This lack of differentiation in extreme cases can make the company in question become a price taker versus a price maker. This means that when there is nothing proprietary about a business it falls into the perfectly competitive market category, one in which the owner loses control of the price that they can charge. Not being in control of pricing can greatly diminish revenue and thus profit since the companies have to price their product at the market price. In most cases, the market price is lower than what a consumer would pay for a product or experience they perceive to be special, even if it was the exact same thing. 

 The grocery market has a very difficult time differentiating themselves from there competitors for one main reason. This being that there is not much room for further growth of this industry in the United States. Large amounts of growth come from seeing an open market and being the producer or the company that fills it. However, with the grocery market that gap is already filled, and so their only way of increasing the amount of costumers is by taking them from their competitors in order to gain market share.  Whereas in other industries that have room for growth, companies can focus on convincing people who have yet to buy the product to purchase it, which is a much easier endeavor. Think about it… There would have to be a pretty significant reason for you to change grocery stores after you had been shopping at the same one for years especially since they all have a seemingly similar product mix.  

Quite frankly, this is the reason why the grocery industry fell 15% in sales over the past ten years. Other companies such as Wal-Mart, Target, and Costco, who are classified as discount stores, have cued in on this opportunity and taken over the food market industry. This is because they all have strong differentiation from their competitors. At Wal-Mart, you know you can get cheap products and better convenience since you only have to stop at one place to get a huge variety of household products. Target is seen as a more fashionable Wal-Mart, and Costco differentiates by selling in bulk.  As a result of this Discount stores count for 18% of “food at home sales” and grocery stores only account for 6%. Differentiation is a key factor in gaining customers and the success of these companies.

http://online.wsj.com/article/SB10001424052702304373804577522912244866078.html