“Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of value.” ~ Michael Porter
The concept of being unique or different is an imperative in today’s business environment. The key to successful marketing and competing is differentiation. What used to be national markets with local companies competing for business has become a global market with everyone competing for everyone’s business everywhere.
Choosing among multiple options is always based on differences, implicit or explicit, so you must differentiate in order to give the customer a reason to select your product or service.
In the article “Differentiation–Smart Strategies for Solo Entrepreneur” by Terri Zwierzynski writes: “So what makes you different?” In business terms, to differentiate means to create a benefit that customers perceive as being of greater value to them than what they can get elsewhere. It’s not enough for you to be different; a potential customer has to take note of the difference and must feel that the difference somehow fits their need, better… (That means you have a better competitive advantage, unique selling proposition, or value proposition.)
Differentiation allows you to charge a fair price because you are delivering more value to your customers. It’s prudent to evaluate and adjust your differentiation methods at least annually. Keys to successful differentiation:
- Know your customers, really, really well.
- Pick a blend of differentiation methods that, in the eyes of your customers, truly sets you apart.
- Talk about your differentiation in terms of customer benefits.
- Tell everyone about what differentiates you–often.
- Keep your differentiation fresh by listening for changing customer needs.
In the article “Have You Got Differentiation?” by Kevin Levi writes: The best way to leverage your key messages to differentiate yourself and your business is to use quantifiable metrics. Instead of saying proven solution, why not list your total number of clients, or even actual customer names (if possible)? Rather than using words like global or leader, explain why you are global.
For instance, list the number of countries you operate in or all of the geographic regions you service. And if you are a leader or innovator in your space, then talk about exactly what it is that makes you so. Don’t leave your clients guessing. Words like leader and innovator are a waste of space if they aren’t explained. The key here is to stand out from your competition. Make it easy for your clients and prospects to exalt you higher than the others.
In your messaging or positioning statement state exactly what customer problem you are solving or fulfilling. Don’t only talk about how great you are; tell the potential client what it is you are going to help them accomplish. At the end of the day, messaging is all about differentiation. Whatever you and your business can hang your hat on, do so. If you have certain reasons why you stand above the rest, tell people about it — shout if from the rooftops. Business is no place to be modest. Honest-Yes: Modest-No.
In the article “Making Differentiation Make a Difference” by Patrick Barwise and Seán Meehan writes: Many companies wrongly allocate millions of dollars to add a slight twist to their product — a new color, a new taste, a new chemical, or a new label — to distinguish it from the previous version. They put an equal amount of money into promoting their new-and-improved product through advertising and other marketing campaigns. Their return, over the long term, is usually marginal.
Marketers ardently care about those little features because they believe the features make their products and services stand out. That’s why they try so hard to build their brand’s performance on tidbits like a deodorant with vitamin E, the cereal that proclaims it stays crispy in milk longer than the others, or the Web-enabled refrigerator…
But customers hardly seem impressed. With all the brand tinkering that’s gone on in the past decade, the University of Michigan’s American Customer Satisfaction Index, which measures satisfaction for 200 companies in 40 industries has never exceeded 75 out of a theoretical maximum of 100. Although scores in some industries have risen in the last few years, many industries rate lower today than they did in 1994.
What’s wrong? When companies are so preoccupied with fiddling with individual products and brands, they lose sight of the value they can create for themselves, and for consumers, by raising the bar for the entire category. If Crest, Exxon Mobil, Tide, Citibank, or Marriott disappeared tomorrow, most American consumers would at worst feel slightly inconvenienced by having to switch to indistinguishable alternative. But how would they feel if an entire category — toothpaste, gasoline, detergent, consumer banks, or hotels — disappeared? That would have an effect on their lives they’d notice.
So how can a company be rewarded for getting consumers to notice their role in raising category quality? To start, companies need to know what customers really care about. In 1993, Unilever launched ‘Mentadent’ toothpaste, a combination of toothpaste, baking soda, and peroxide delivered through a clever pump.
Within two years, Mentadent became a $250 million brand with a 12 percent share of the U.S.toothpaste market, an impressive figure in this crowded category. Why? Because Unilever understood that dental hygiene is what’s on people’s minds when they buy toothpaste. So the company created a product that offered superior dental hygiene. Unlike a meaningless pink stripe down the middle of the toothpaste, this was differentiation that made a difference.
In his 1980 classic Competitive Strategy: Techniques for Analysing Industries and Competitors, Michael Porter describes a category scheme consisting of three general types of strategies that are commonly used by businesses to achieve and maintain competitive advantage. These three ‘generic strategies’ are defined along two dimensions: strategic scope and strategic strength.
Strategic scope is a demand-side dimension and looks at the size and composition of the market you intend to target. Strategic strength is a supply-side dimension and looks at the strength or core competency of the firm. In particular he identified two competencies that he felt were most important: product differentiation and product cost (efficiency).
Then, later he simplified the scheme by reducing it down to the three best strategies. They are cost leadership, differentiation, and market segmentation (or focus). Market segmentation is narrow in scope while both cost leadership and differentiation are relatively broad in market scope.
Since that time, empirical research has indicated companies pursuing both differentiation and low-cost strategies may be more successful than companies pursuing only one strategy. Some commentators have made a distinction between cost leadership, that is, low cost strategies, and best cost strategies. They claim that a low cost strategy is rarely able to provide a sustainable competitive advantage. In most cases firms end up in price wars. Instead, they claim a best cost strategy is preferred. This involves providing the best value for a relatively low price.
A popular post-Porter model was presented by W. Chan Kim and Renée Mauborgne in their 1999 Harvard Business Review article “Creating New Market Space”. In this article they described a “value innovation” model in which companies must look outside their present paradigms to find ‘new value propositions’. Their approach fundamentally goes against Porter’s concept that a firm must focus either on cost leadership or on differentiation. They later went on to publish their ideas in the book “Blue Ocean Strategy”.
In the book “Differentiate or Die” by Jack Trout and co-author Steve Rivkin, spell out a 4-step process for differentiating a company from its competition. For easy recall we sum it up in a sentence: Discover-it, define-it, prove-it, proclaim-it. The “it,” of course, being that thing which makes your company different from — and, therefore, presumably better than — your competitors. Adding a fifth step: Proliferate-it, the following 5-step differentiation process emerges:
- Discover – what it is about your company that makes it different from — and, therefore, better than — its competitors.
- Define – that difference in a brief statement — the fewer words, the better.
- Prove – that what’s stated in the statement is true.
- Proclaim – the statement everywhere and project the point of difference through every aspect of your business.
- Proliferate – the point of difference by installing not duplicable products, services, promotions, and methods that expand that difference and also protect it from competitive encroachment. We call these things differentiation-builders.
‘Differentiate or Die’ builds upon a very simple premise: To survive, or at least out-perform, one’s competitors in this era of killer competition, a company must out-differentiate that competition…
“Don’t forget that it (your product or service) is not differentiated until the customer understands the difference.” ~Tom Peters
In the article “There is Little Benefit in Having a Highly Differentiated Product That No One Wants to Buy” by Terra L. Fletcher writes: The differentiation strategy of a business is a predetermined set of actions designed to produce and deliver goods or services to customers who perceive the company’s offering as different. Not just different, but different in a way that is important to the customer. This means meeting your customer’s unique needs with products in a way that gives your company a competitive advantage.
When you have the ability to view your business and competition from an objective viewpoint; the differentiation necessary to separate yourself and your product or service becomes clear. Determine precisely what your current positioning is and how you could improve it. Then, determine your exact competitive advantage and how can you improve your difference and separate yourself further from the competition. A strong business differentiation strategy is fundamental to a successful business.
Put yourself in the place of the business’ customer. The question here is “Why go to company A instead of company B? The only reason would be the items that differentiate the two (price, quality, location, atmosphere, response time, etc.).
It is important to note that these differentiators will be most effective if they reflect your brand’s core values and committed promise. Creating a differentiator for the sake of differentiation will be short-lived and thus create distrust among not only your customers, but your employees as well. Take some time to think through the key attributes of your brand’s DNA, and sometimes it takes getting back to basics before you can take the next step towards evolution.
“To create differentiation that won’t be imitated, you have to think beyond the core benefits that are considered important in your market. The companies that have succeeded in maintaining their differentiation over the years and weren’t imitated even though they were making tremendous profits are those that innovated in qualities beyond the core benefits of their market.”
In the article “Meaningful Brands from Meaningless Differentiation: the Dependence on Irrelevant Attributes” by Carpenter, Gregory S.; Glazer, Rashi; Nakamoto, Kent write: Product differentiation is a classic marketing strategy, well illustrated by General Motor’s legendary success in differentiating itself from Ford by introducing colors. Much has been written about product differentiation strategies (e.g., Aaker 1991; Kotler 1991; Porter 1985).
The prevailing view is that successful product differentiation requires distinguishing a product or brand from competitors on an attribute that is meaningful, relevant, and valuable. For example, Porter describes differentiation as developing a unique position on an attribute that is “widely valued by buyers”.
However, many brands also successfully differentiate on an attribute that appears valuable but, on closer examination, is ‘irrelevant’ to creating the implied benefit. For example, Procter & Gamble differentiates instant Folger’s coffee by its ‘flaked coffee crystals’ created through a “unique, patented process,” implying (but not stating) in its advertising that flaked coffee crystals improve the taste of coffee.
In fact, the shape of the coffee particle is relevant for ground coffee (greater surface area exposed during brewing extracts more flavor), but it is irrelevant for instant coffee: The crystal simply dissolves, so its surface area does not affect flavor. Similarly, Alberto Culver differentiates its Alberto Natural Silk Shampoo by including silk in the shampoo, and advertising it with the slogan “We put silk in a bottle” to suggest a user’s hair will be silky. However, a company spokesman conceded that silk “doesn’t really do anything for hair”.
Consumers apparently value these differentiating attributes even though they are, in one sense, irrelevant… We argue that adding an irrelevant attribute to one brand changes the structure of the decision consumers face, especially if the differentiating attribute is difficult to evaluate, such as silk in shampoo. As a result, consumers may infer the attribute’s value and, in some cases, conclude that it is valuable…
“Competitive differentiation has become the life blood of organization as it is the base for value creation. Presently, business organizations operate in all areas through people and it is their contribution which determines success.” ~Deepak Jaroliya
Buying is an exercise in decision-making. Some buying decisions are made impulsively and almost unconsciously; others are made after long and careful consideration. But all decisions, that is, all logical decisions; are ultimately the end result of a mental selection process by which the buyer converges on a “best” option. Buyers can perform that selection process in two ways: They can make the selection at random, by throwing dice, drawing straws, or just guessing.
Or they can make the selection by differentiating; by acting on a perceived distinction between the available options. Of these two ways of deciding, differentiation is by far more “natural”; it’s the rational process to sort and select one product or service over another. Nobody (well almost nobody) makes a decision, especially a potentially costly buying decision, by random choice unless there is no distinguishable difference between the options. This is differentiation, and without it you lose…
“The essence of strategy lies in creating tomorrow’s competitive advantages (differentiation) faster than competitors can mimic the ones you possess today.” ~ Gary Hamel & C. K. Prahalad