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How can you measure the impact of your differentiation strategy on your sales and profitability?

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Differentiation is a strategy that aims to make your product or service stand out from your competitors by offering unique features, benefits, or experiences that appeal to your target customers. But how do you know if your differentiation strategy is working and delivering the results you want? In this article, you will learn how to measure the impact of your differentiation strategy on your sales and profitability using four key metrics: customer satisfaction, market share, price premium, and customer loyalty.

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1 Customer satisfaction

One of the most important indicators of your differentiation strategy is how satisfied your customers are with your product or service. Customer satisfaction reflects how well you meet or exceed your customers' expectations and needs, and how much they value your unique offering. You can measure customer satisfaction using surveys, feedback forms, reviews, ratings, testimonials, or referrals. A high level of customer satisfaction means that you are creating value for your customers and that they are likely to repeat their purchases, recommend you to others, and resist switching to competitors.

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peter dean

chairman at cambio ltd
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When I was asked to produce an improved test for HbA1c in monitoring diabetes, the original method used electrophoresis - the test took hours to perform. Our invention used phenyl boronate attached to sepharose beads and took minutes. When my student Saroj visited haematology they thought she might be diabetic because her Hb showed a â€œfastâ€ element. Our test had just been reduced to practice in the lab and she tested negative. Haematology then realised she was beta thalassemic. We saved our customers hours whilst they waited for their results using the old method. We received dozens of letters of thanks from customers and patients alike. 45 years later I still get thanks from grateful diabetics.

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2 Market share

Another way to measure the impact of your differentiation strategy is to look at your market share, which is the percentage of the total sales in your industry or segment that you capture. Market share shows how well you compete with other players in your market and how much demand you generate for your product or service. You can calculate your market share by dividing your sales by the total sales of your industry or segment in a given period. A growing market share means that you are attracting more customers, increasing your visibility and reputation, and gaining a competitive edge.

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3 Price premium

A third metric that can help you measure the impact of your differentiation strategy is the price premium, which is the extra amount that customers are willing to pay for your product or service compared to the average price of similar products or services in your market. Price premium reflects how much customers perceive and appreciate your unique value proposition and how much they trust your quality and reliability. You can estimate your price premium by comparing your price with the average price of your competitors or by asking your customers how much they would pay for your product or service if it was not available. A high price premium means that you are creating a strong differentiation advantage and that you are maximizing your profitability.

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4 Customer loyalty

A fourth metric that can help you measure the impact of your differentiation strategy is the customer loyalty, which is the degree to which customers remain faithful to your brand and continue to buy from you over time. Customer loyalty shows how well you retain and nurture your existing customers and how much they value your relationship and experience. You can measure customer loyalty using metrics such as retention rate, churn rate, repeat purchase rate, lifetime value, or net promoter score. A high level of customer loyalty means that you are building a loyal fan base, reducing your acquisition costs, and increasing your revenue potential.

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5 Hereâ€™s what else to consider

This is a space to share examples, stories, or insights that donâ€™t fit into any of the previous sections. What else would you like to add?

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peter dean

chairman at cambio ltd
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When PCR became possible through thermophilic Taq, we needed a machine that was British, not outrageously expensive and had a way of telling us what the reaction temperatures were. Martin Evans invented the flying thermocouple to go in the Intelligent Heating Block. Our customers loved this feature and Cambio sold quite a few. This and a superior Taq made a name for our little company together with a most appropriate name for the company and we were unstoppable

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How can you measure the impact of your differentiation strategy on your sales and profitability?

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1 Customer satisfaction

2 Market share

3 Price premium

4 Customer loyalty

5 Hereâ€™s what else to consider

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How can you measure the impact of your differentiation strategy on your sales and profitability?

1

2

3

4

5

1 Customer satisfaction

2 Market share

3 Price premium

4 Customer loyalty

5 Hereâ€™s what else to consider

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