Tuesday, April 17, 2012

Dyson Vacuums: How Product Differentiation Helped Vault Dyson to the Top of the Vacuum Market

According to our reading “Types of Strategy: Which Fits Your Business” there are four basic strategies that an organization can pursue: low-cost leadership, product/service differentiation, customer relationship, and network effect. Part of the impetus for taking this course was a desire to understand how organizations decide which strategy to pursue and how to effectively execute that strategy. In my healthcare marketing course with Jim Jordan we had to participate in a Marketplace Simulation where different teams within the class competed to secure both market dominance and profitability in the computer production market. My team (which eventually won-not to brag or anything) adopted a high price, high quality strategy which followed the principles of differentiation. However, it only really became a really effective strategy when we focused on marketing are product as different. What I learned was that is not enough to simply make a product that is different than its competitors you have to market it that way as well. One example in real life industry that I kept thinking about was the success of Dyson Vacuums.

Prior to the entrance of Dyson Vacuums in the United States market in the fall of 2002, the vacuum market was dominated by six well established brands: Maytag-Hoover, Kenmore, Oreck, Eureka, and Bissell. [1] Entrants to the vacuum market had previously languished at the bottom of the market because of trouble competing for market share. Dyson was able to buck this trend and make an immediate splash in the vacuum market, jumping up to the number 2 seller of vacuums by 2004. This was achieved through their use of the product differentiation strategy. Other vacuum manufacturers had been competing on price with each other for significant amount of time resulting in the adoption of low cost leadership strategy. Dyson eschewed that strategy and instead focused on making a high quality product that simply a much better vacuum then the others on the market. The cornerstone of this high quality product was a new technology for suction called cyclone technology. Correspondingly Dyson priced the product significantly above its market competitors. The theory was consumers would be willing to pay the premium if the product was significantly better than its competitors.

However, this differentiation strategy was not fully realized until Dyson began an extensive and highly effective marketing campaign.[2] Their marketing campaign centered on the idea that Dyson was “heads and shoulders” above anything else in the market. Featuring prominently the suave British founder of Dyson, Sir James Dyson, the marketing campaign was able to do the unthinkable- make vacuums stylish. The success of the marketing campaign was that Dyson vacuums were able to fully differentiate themselves from all other competitors creating substantial demand for this “new and better product”.

My question is would Dyson have been so successful at differentiating their product if the advertising and marketing campaign had not been able to effectively influence people’s perceptions. Are there other techniques that can be used besides advertising? Also how can companies like Dyson ensure continued differentiation after the novelty of their product has worn off?

[1] http://adage.com/article/news/2-market-share-dyson-hoovers-vacuum-business/101369/

[2] http://www.newyorker.com/reporting/2010/09/20/100920fa_fact_seabrook

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