Advertising Primer 2: Differential Advantage

When you think of Priceline.com, you probably associate the brand with low prices on travel purchases. In fact, "price" is in their name! And every Priceline ad emphasizes one main benefit: low prices. Low price is an example of what marketers call a "differential advantage"—the exclusive benefit(s) that a brand offers to potential customers.*

The key here is "exclusive." You must be able to convince your audience that the benefits you offer are not available from the other sources. This is not so easy to achieve with a differential advantage like "the lowest price," unless you actually offer the lowest price. However, if you claim to offer an advantage like "the most sophisticated product line," you stand a better chance of staking a claim. "Price" is objective (your prices are either lower, or they are not), but "sophistication" is subjective (one person may think Mercedes is sophisticated, but another will only consider a Rolls Royce).

A second concern is that your customers must care about the differential advantage your product offers. For example, wealthy consumers will not be concerned with the lowest prices, generally. You must choose your differential advantage based on qualities your customers care about.

Finally, potential customers must be willing to pay for the differential advantage your product offers. Most people would agree a Rolls Royce is a sophisticated automobile brand, but few of us have the means or desire to lay down the cash required for this luxury item. Conversely, if your differential advantage is having the lowest price, you might find customers won't buy your brand if they believe your quality is too low. In other words, their primary concern might be price, but they see the "cost" of an inferior product as too great to justify a small savings in price.

A product or service may have multiple differential advantages. You may claim both the lowest price and the most sophisticated product. But be careful: often such pairings will seem mutually exclusive to customers, even if they are valid claims. Consider how rare it is, for example, to find the most sophisticated product at the lowest price.

Ultimately, a differential advantage is what companies use to "position" their products or services. Positioning defines how a given product will compete, the competitors it will compete against, and the target market for which it will compete. Positioning a product line is based on it's "competitive strengths," which are the proofs to support the differential advantage in ways that are clearly understood and valued by the customer base.

If you position your product effectively, using competitive strengths to support a differential advantage, you will have the best chance of attracting loyal customers. These customers believe they can't obtain the elsewhere even if "parity" (equally beneficial substitutes) products are available.

So let's look at some other examples of differential advantages besides price and sophistication and their supporting competitive advantages:

Differential Advantage: Highest Quality

Example: Dyson vacuums

Competitive Advantage: Performance. Dyson claims their vacuums outperform all other brands because Dyson vacuums never lose suction. Their website boasts, "Other technology might look like Dyson technology, but it doesn't work like it." Dyson TV ads claim every other vacuum design is fundamentally flawed because dust and dirt reduces airflow and decreases performance.

Differential Advantage: Broad Product Line

Example: AutoTrader.com

Competitive Advantages: Convenience and customization. AutoTrader's website says, "Our site is designed to give you more control of the buying process and make finding a vehicle easier than ever before...AutoTrader.com is the only website with more than 3 million vehicle listings from 40,000 dealers and 250,000 private owners. We provide the largest selection of vehicles." A recent TV commercial claims, "When you search from the largest collection, you get the car you want at the price you want."

Differential Advantage: Innovative Technology

Example: GM's OnStar service

Competitive Advantages: Safety, reliability, and convenience. A 2006 TV spot presents some of the many benefits of a Chevy vehicle with OnStar: remote door unlock, vehicle diagnostics, emergency services, stolen vehicle location assistance, and hands-free calling. Versus other similar services, the OnStar website claims theirs is the "most comprehensive in-vehicle security, communications, and diagnostics system."

Differential Advantage: Broad Distribution

Example: Netflix

Competitive Advantage: Convenience. The Netflix distribution system brings the movie rental store to your mailbox--or even your Xbox. Users no longer have to go to the store--they order online and movies come in the mail. They can keep movies as long as they want with no late fees. And recently, Netflix has begun distributing many movies for instant viewing through the internet to PCs and even Xbox 360 game systems.

From the Netflix website: "DVDs are delivered free to members by first class mail, with a postage-paid return envelope, from 55 distribution centers. More than 95 percent of Netflix members live in areas that generally receive shipments in one business day. Netflix is also partnering with leading consumer electronics companies to offer a range of devices that can instantly stream movies and TV episodes to members' TVs from Netflix."

Interestingly, it could be argued that the Netflix distribution system actually reduces convenience on the front end: DVD customers can't rent movies the same day. They must order a rental and wait for it to be delivered. Blockbuster claims their own competitive advantage here with a similar service which allows customers to order through the mail or rent from one of their many physical stores. And Blockbuster also offers movie downloads to PCs.

Differential Advantage: Strong Technical Service

Example: H&R Block

Competitive Advantage: Peace of mind. The company's slogan is "You've got people." A 2009 TV ad illustrates this idea with humor. In the ad, an H&R Block consultant watches a man prepare his taxes through the H&R Block website. The consultant compares himself to a guardian angel saying, "if there's a problem, I can swoop in and help him out."

This claim of help when you need it carries to the company's tax preparation software as well. The H&R Block website details two of the main advantages of their software over the competition's:

-Only from H&R Block: One Ask a Tax Advisor session included. An H&R Block tax professional can help answer your tax question via a 1-on-1 phone or e-mail consultation.

-Only from H&R Block: Worry-free Audit Support® offers guidance plus an H&R Block enrolled agent to represent you in the event of an audit.

Differential Advantage: Reputation/Image

Example: Louis Vuitton

Competitive Advantages: Luxury, social status, confidence. French fashion designer Louis Vuitton specializes in luxury leather luggage. The company's 90 second "Journeys" ad exudes image and style. Though it was their first-ever TV commercial, they actually call it a film; Louis Vuitton commissioned a respected film director for its production. The ad barely exhibits the LV product line, focusing instead on the spirit of travel, confidently but quietly suggesting the brand's preeminence.


*Some content for this series was derived from course notes from Introduction to Advertising, UC Berkeley Extension.