Discussion: Exploitation of a Narrow Target
Discussion: Exploitation of a Narrow Target
Through differentiation, the organization offers its product or service in a way that appears unique in the mar- ketplace. The organization identifies which qualitative dimensions are most important to its customers and then finds ways to add value along one or more of those dimensions. For this strategy to work, the price charged cus- tomers for the differentiator must seem fair relative to the price charged by competitors. Typically, multiple firms in any given market employ this strategy. Progressive Insurance is able to differentiate itself from other automobile insurance companies.
In its earlier days, Progressive Insurance’s service was unique. Representatives responded to accident claims 24‐7, arriving at the scene of the accident with powerful laptops and software that enabled them to settle claims and cut a check on the spot. More recently, Progressive was the first to offer a usage‐based insurance product, called Snapshot, that bases insurance rates on the miles driven by customers. These innovations enabled a strategy that spurred Progressive’s growth and widened its profit margins. Apple Inc. is another example of a company that com- petes in its markets on its ability to differentiate its products. Apple’s various innovations in its operating system, laptop design, iPads, iPhones, iPods, iTunes and iWatches have created a strategy based on the uniqueness of its products and services.
Focus allows an organization to limit its scope to a narrower segment of the market and tailor its offerings to that group of customers. This strategy has two variants: (1) cost focus, in which the organization seeks a cost advantage within its segment and (2) differentiation focus, in which it seeks to distinguish its products or services within the segment. This strategy allows the organization to achieve a local competitive advantage even if it does not achieve competitive advantage in the marketplace overall. Porter explains how the focuser can achieve compet- itive advantage by focusing exclusively on certain market segments:
Breadth of target is clearly a matter of degree, but the essence of focus is the exploitation of a narrow target’s differ- ences from the balance of the industry. Narrow focus in and of itself is not sufficient for above‐average performance.7
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