Differentiation – Do You Know What Yours Is?
If your company is not different, then you are the same as your competition. If a customer sees everyone as the same, then they will gravitate to what’s cheapest. That is the real purpose of defining your differentiators – to build and hold value with your customers. If your company can define its differentiators so that they appeal to your customers, then that will strongly influence their final decision. Ultimately if you stand out with your customers, then close rates go up, and you maintain margins more effectively.
Before getting into Differentiation, let’s start by talking about Positioning. Positioning is The Value Discipline with which you will develop and present your solutions to your customers. It helps you better understand and execute on the one thing that you want your organization to be known for.
Michael Treacy and Fred Wiersema solidified The Value Disciplines concept in their book: The Discipline of Market Leaders. The authors presented a business model with three critical competitive areas:
- Customer Intimacy
- Product Leadership
- Operational Excellence
To paraphrase their work, you can be a market leader in one of these three areas, but not all three. This is how the market perceives your company and your products. They are explained further below.
These companies offer products or services that adapt to their customers’ exact needs and values. Think of this as bending or customizing your solution to meet the specific needs of an industry or specific customer. Companies that do this will typically charge more for this customization, but they are all about shaping their solution to meet a specific need. Some of the companies or products that come to mind are Stich Fix, Zappos, USAA Insurance, etc.
The guiding principles for effective Customer Intimacy are having a full range of options available to serve the customers on-demand and a corporate philosophy resulting in business practices that encourage deep customer insight.
These types of companies will often partner with other organizations to help provide the solution if they cannot provide it themselves.
Companies who excel in this area offer products that feature new methods, are advanced and original. Think of this category as the really cool, innovative products that the market just can’t wait to see. These are often a good or service that is either new or an improved version of previous goods or services. Some of the companies or products that come to mind in this category are Tesla, Apple, Netflix, etc. All of these companies are continually innovating. The market even lines up to buy from them before the latest new product or service is released.
The guiding principles for effective Product Leadership are the encouragement of innovation, risk-oriented management, drive, and talented designers.
Focusing on affordable products or services that are within most people’s budgets defines this position. These are often the price leaders because they don’t have the coolest or most innovative product or service, but they have done whatever they can to drive the cost of providing their solution. They focus on supply chain and efficiency in delivery. Some of the companies or products that come to mind are IKEA, Kia, H&M, etc. These companies typically are not known for the highest quality or innovation and are also not known for customization. They are known for a decent product at an aggressive price.
The guiding principles for effective Operational Excellence are focused on low-cost, maximizing the efficiency of all facets of a transaction, and avoid over-promising.
Now reflect on your own company. Which of these three areas are you known for? Any of them? Many companies find that they are “a little of each, but not strong at anyone.” We label these companies as being in “no man’s land.” They struggle because there will always be someone who is cooler or more innovative or willing/able to customize more or will be cheaper. That’s a hard place to compete from.
After you’ve determined your company position, it’s time to find out what makes your company stand out. We have a few questions you can ask yourself to know if it’s a true differentiator or not:
- Is the customer willing to pay more for it?
- Can they get the same thing, or substantially the same thing somewhere else?
- Is it important to them?
Based on your answers, you can then determine if it’s a true differentiator not. Here’s our example:
Based on those three questions, custom design is a differentiator for that company. When a customer finds value in your product or service, they are willing to pay more. We’ve seen this with companies who customize their products and save their customers time and energy.
Most successful companies can identify three to five true differentiators in their offering. They are masters at leveraging those differentiators.
Companies who struggle to differentiate use phrases like “We are better because we have great customer service and excellent people.” That may be true, but if your competitor is saying the same thing (and they are), then your prospect does not see anything different.
After you find out what your true differentiator(s) are, then it’s time to train your salespeople on the correct messaging so they can leverage that Differentiation to hold value. A few tips are:
- Use questions to get the customer to tell you why your differentiator is important verses you merely telling them. If I simply tell you that my widget is better because it is faster/more efficient/safer, that point may or may not hit home and connect with the buyer. Instead, ask questions like “How important is speed? How long does it take you to ….?” The goal here is to uncover whether your differentiator is essential to them or not.
- Help the customer connect the dots for how the differentiator will help the business (make money, save money, avoid risk, etc.). Define how much per month/year, etc. Continue with questions like “If you could cut 20% of time off of your current process, how much money would that save you?” This makes the customer really think through things and connect the dots on the real value of your offering.
- Find personal wins the differentiator brings to the decision-makers and influencers (saves them time, makes their life easier, gives them better information). Many salespeople don’t focus enough on personal wins. Instead, they only focus on the benefits to the company. If you can show they buyer or user how your solution will make their life easier, save them time personally, make them look good, etc. your chances of winning go up again.
Once you know how your product or service is different and you’ve worked with your sales team to define the proper messaging, then your win rate will increase.
Differentiation is the key to surviving in a crowded marketplace. By conducting an analysis, determining your companies’ position, and getting your team’s messaging correctly, you can then sell your product or services to your ideal clients and win more.