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The question is: How can companies use social media to build strategic differentiation?

One example could be the ongoing campaign from Danske Bank. They have desperately been trying to salvage their reputation by changing their strategic differentiation to customer satisfaction. In relation to this, they allowed users to freely comment the bank and its actions on a dedicated Danske Bank site. According to Danske Bank, 3500 people either commented or uploaded comments to the site – not bad for a couple of months of running in the Danish market!

The campaign has now turned into 23 specific actions and a twitter account. Time will tell if their new focus and media channel strategy will bring them closer to their customers.

One of the weapons in the fight for increased efficiency is behavioral segmentation. While it has been around for some time, relatively few companies have actually discovered it. Many still stick to traditional, less insightful, and thus less effective segmentation methods - if they segment at all. The great advantage of behavioral segmentation is that it allows you to get into the mindset of a customer, and it will give new insights in how you should differentiate strategically. By doing so you can more effectively drive product development, sales initiatives, and marketing communication from it.

I recently read an article in the McKinsey Quarterly that zoomed in on the wealthy in China, underlining the benefit of behavioral segmentation. “…Easily obtained demographic information - age, gender, and income, for instance - offers little help in separating China’s wealthy into segments with differing attitudes toward, say, borrowing, fashion, or obvious displays of wealth… More meaningful differences emerged when we considered what respondents said about their needs - the need to feel unique, for example, or to feel financially secure.”

Tuning into customers’ needs will offer a much better way out of the recession than price dumping - a strategy used by many companies. A recent survey in the Netherlands showed that while supermarkets are aggressively offering discounts, the amount of the Dutch consumers that are price sensitive hasn’t changed due to the recession. According to Trendbox, whom conducted the survey, the only consequence the discounts have had, is that discounted products have replaced the purchase of normally priced products. However, the discounts did not bring any extra customers, as the choice of their supermarket is based on other, more valuable parameters.

Especially when combined with demographic segmentation, behavioral segmentation helps companies to truly move from being product oriented to being value oriented. It will give companies the opportunity to position themselves in a way that is true, relevant and high value to their customers. Once this is done, companies can focus on the right customers, with the right proposition, and make sure that the right customers stick around longer.

In mid September Philips issued a press release, announcing that the total estimated value of the Philips brand in 2009 was USD 8.1bn. This represents a dramatic climb since Philips launched its “sense and simplicity” brand promise in 2004, when its brand was valued USD 4.4 billion. In 2008, Philips’ brand value value grew more than twice as fast as that of its closest competitors.

Is it just juggling with numbers, or is Philips able to translate “sense and simplicity” into a positive customer experience designed around their needs? According to a Philips investor relations presentation, a significant amount of sales is attributable to the brand alone:

• Healthcare 29%
• Consumer Lifestyle 24%
• Lighting 21%

“Sense and simplicity” has become the driver of a strong internal brand, with 83% of employees now mentioning that they are “proud to work for Philips”.

Clearly, the repositioning has enabled Philips to become true, relevant and of high value to everyone across the value chain.

Volvo’s new Collision Warning with Full Auto Brake and Pedestrian Detection may never be activated in most owners’ cars. It’s like airbags in that way. Also like them, if it is activated, it’s the sort of system that will make owners praise such advances in road safety.

Volvo’s pedestrian detection system is effectively an evolution of the Swedish brand’s impressive City Safety technology.

Except that where City Safety only detects other vehicles - applying the brakes to help reduce or avoid an impact - the Pedestrian Detection keeps an eye out or humans.

Then it can apply the brakes, avoiding the crash at below 25km/h and reducing speeds by 25km/h at higher speeds.

As Volvo rightfully points out, though, while it may not detect every pedestrian it will detect a lot, which has the potential to save plenty of lives.

Click here to read the article.

If you read Danish, I also recommend that you register online to read the full magazine including articles on neuroscience, brand equity and preventing brand erosion. Click here to register.

Many companies have good corporate cultures. However, industry leaders have corporate cultures that directly reinforce their differentiation in the market. We’ve always said your goal should be to build “cultural uniqueness” and this priority occupies the left side of the Quadric framework. This book puts the priority on the agenda and describes ways of translating differentiation goals into practical HR approaches. In our experience, HR teams welcome the chance to be more closely linked to the market but functions are often disconnected.

Read the book description here

It’s hard to argue with the power of Philips’ differentiation in a field of similar competitors. As mentioned in a previous post, the involvement of people in the process made the difference. Now, Philips Design is helping Stora Enso through a brand-driven transformation and it sounds like they are using the same thoughtful and engaging approach.

Jouko Karvinen, CEO of Stora Enso, was head of American Philips Medical Systems during 2002-2006, the years in which Philips developed and implemented their positioning strategy. He is already defining Stora Enso’s business more broadly than most, viewing materials like plastic and metal as the real competitive landscape. The collaboration with Philips Design, and the investments that follow, have the potential to change the game in the forest products industry.

Read the announcement by Philips Design

In addition to describing the success of GE’s focus on Ecomagination, it speculated that healthcare was the next “megatrend” they would focus on “solving”. Clearly a company that knows where they are going to build their reputation for “solving the world’s toughest problems”.

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GE only had a modest environmental record in 2005 and many of their products were central to industries with the worst carbon footprints. With leadership commitment, excellent brand work, innovation and acquisitions, they are now an environmental leader in many ways.

Volvo is responsible, but responsibility hasn’t been the biggest growth driver in the past. In the future, the safety premium still has value. However, if Volvo’s positioning can be broadened to envelop environmental benefits and cost savings, they may find a much bigger market.

Ford’s heritage and compatibility with Volvo thus far make it a worthy owner in all but financial strength. If Ford sells Volvo, the new owner will be getting much more than a solid luxury car company.

Take a look at our interpretation of Volvo’s strategic differentiation below:

Behind the scenes, Chr. Hansen is a company with the integrity and capability to lead their industry. Their unique way of building working partnerships with customers differentiates them today. Probiotics, linked to strengthening of immune systems, is one of the most exciting opportunities for the future. With the right strategy, Chr. Hansen could help customers drive the change in consumer behavior that would lead to market growth and related health benefits that would otherwise take years to develop.

Read the full article.

Josephine Green, one of the primary drivers behind Philips’ repositioning, once told Mark and me how it came about. She described the research, the insights and the link to the business strategy. But the most important thing she said was that the focus on simplicity felt right to everyone involved in the process. They where putting people in the center and taking a very human view of the future.

That leads to the other part of the answer. Positioning strategy isn’t science. For most companies, there is more than one right direction. The important thing is that people believe in the direction you choose.

This video describes the sense in Philips’ simplicity:

When we analyzed GE’s Quadric in 2004, the environment didn’t even show up. Since then, they innovated and bought their way into environmental leadership. Recently, GE was one of the companies with the guts to buy a Superbowl spot (and keep it). The reason is that they see improving the environment and cost savings as two sides of the same opportunity.

The video below describes what happened when GE decided to make the environment their growth strategy:

• Show how the positioning strategies of industry-leading companies influence their brands, culture, operations and marketing
• Explore how the Quadric framework works
• Highlight companies, academics, consultants and creative professionals we think are worth watching