23 Mar Avoid “What’s the difference?”
What is your strategy for stopping customers from thinking “What’s the difference”? Here’s some thoughts about how to lead your category and highlight differences that matter.
By Joe Danielson
Professional customers want relations with leaders.
Sales people know best if their company is seen by its customers as offering the same products as its competitor. So one of the simplest ways to know if your differentiation and positioning approaches are working is to ask your salesforce this simple question: how often do you talk to customers about “the difference” between our product and those from direct competitors. Cross check by then asking your sales director(s): “are we competing on price?”.
A new or improved product for professional usage almost automatically used to mean its manufacturer would generate profitability via significant price margins or volumes. High quality b2b manufacturers just waited for word of their latest innovations to trickle into the market. However, those days and ways are gone for good. Today, a new product gives professional users only short-term advantages. There are more suppliers and more options. Products are more complicated. And customers often do not have the time or specialist competence needed to assess functional performance.
Hard differentiation only delivers over the short-term.
Even the most ingenious new IT product typically only represents unique assets and value amongst sellers and buyers over the short-term. Depending on the industry, that can be extremely short-term. Consider IT. How long can an ingenious, new IT product represent real differentiated value? The window typically closes in a couple months—at best. The rapid pace of technological evolution either leaves it behind. Or worse, there’s a heightened chance of even ingenious products being outdated before gaining market share. Here are two reasons why: 1) broader solution bundles; and 2) clones. Today, toughening competitors and/or low-price imitation products are everywhere. Focusing on hard differentiation is why so many b2b companies today are finding it hard to defend premium prices. And risk becoming a commodity brand that must compete on price.
Category leaders highlight the right differences.
If you are seen by customers as offering nearly identical physical products as your competitors, you give no particular reason for customers to buy from you —unless you sell at a substantially lower price. Beating the competition through lowest pricing is a perfectly feasible strategy. However, it is seldom sustainable for companies based in high-cost industrialized countries. Even category leaders will have to find other ways to beat their competitors. Or at least be different from their competitors. That’s what differentiation is all about: developing or highlighting differences. But are those differences really found in physical products?
How to avoid the price fight and increase market share!
How will prospects and customers understand what makes your product different from dozens of similar products? Moreover, how can you increase your total market? For companies who lead in an established category, it is usually either a choice of:
• Hard differentiation: adding new and more features and functions to physical products
•Extension: developing products to a related problem or adding service products
• Customer intimacy excellence: matching or surpassing the important customer performance criteria within a product usage category
Hard and soft differention, defined.
Hard differentiation is about adding new features and functions or improving those that already exist. But as we said before, it’s getting harder and harder to find lasting differentiation in the physical features of a product. That’s why soft differentiation is increasingly important. Today, soft differentiation typically involves two means of ‘loading’ a brand with a set of factors that customers value: extension via service products or customer intimacy excellence. Here is what I mean by both.
Soft differentiation through service products.
In simpler terms, this type of differentiation is the human factor of the product offering. The marketer attempts to load its physical or digital product with value-added services. It entails bundling physical products with service products. Depending on the industry and product, service products can include:
• Engineering for custom-tailoring products to customer needs
• Engineering for process optimization support
• Software customization, development and integration support
• Testing, installation and commissioning services
• Training and start-up support
• Production support
• Technical consultation
• Maintenance services
• Information and documentation support
• Managed stock and inventory of consumables, wear protection and spare parts, etc
• Delivery precision
• Upgrade support
Service means two things.
Service is properly defined on two ways. Service is something you do for someone else. And service is also how you perform it. The good news about service excellence differentiation is that each service product offers an opportunity for a supplier to deepen its relationship with a customer. Better still: the passion and commitment people demonstrate when performing service can never be directly copied by competitors. However, many companies offer service products. Both physical products competitors and small service industry niche players. And because service is just as much a mindset and attitude as it is what you offer, it takes real personal commitment to deliver great service products.
Leading by extending the sphere of product excellence.
Extension of product excellence is very familiar to any R&D director. It typically results in a supplier that is already leading in its category (i.e. wood flooring treatment) to develop ancillary or related products (ie. mop with a built in dispenser). If you can match quality levels across the product area, this type of brand extension makes perfect sense. And given today’s preference for integrated IT based experiences, technology often represent the perfec means for extension.
Customer intimacy excellence.
Differentiation through customer intimacy is a means of loading physical products by making customer remember you with a set of distinctive value propositions, associations and attitudes to you as a supplier. It is about managing preference and loyalty to your product by lifting it above the general performance criteria for category to match the most important criteria: those which customers value most. As such, it is often the most important means of differentiation. And together with a solid patent protection, it is the only thing that competitors can never copy. Customer intimacy excellence is the best barrier against competition.
Apple Inc.: leading through customer intimacy excellence.
The differentiation option is about boosting customer perceived advantages within an establishing product usage category. It is often more difficult than marketing products in direct competition with rival products in an already established category. More difficult, but the long-term rewards are often much greater. A great example of what I mean is Apple and the iPod. Apple didn’t invent the world’s first mp3 player with its 2001 iPod launch. In fact, the world’s first mp3 player was actually launched in 1996 by Audio Highway (see picture above). However, what Apple achieved with launching its iPod was to reinvent what the portable music category was all about. Style, simplicity and useability were differentiators that would now represent game-changing criteria for mp3 players — and mobile music was never the same. Under the helm of Steve Jobbs, Apple was the customer intimacy leader. For more proof, just consider what the iPhone did for the smartphone category.