We especially ignore things that are like other things we’ve seen before. It’s a natural response to the clutter that surrounds us every day. Our brains have learned to look for the new and the different, and to ignore that which is undifferentiated. Most of marketing is about efficiently defeating this built-in, natural reflex, and causing potential customers to see our offering as new and different and valuable. In product and service positioning, it’s vital to stand out. In this article I will talk about some simple ways of setting yourself apart from the pack. First, some preconceptions that we might as well remove right at the beginning.
- Nothing has to be a commodity
- Differentiation isn’t always about the product
- Business is not a war with your customers.
Here’s an instructive story about differentiation in the most difficult of circumstances:
You might think that construction sand is the ultimate commodity. You can get it from anywhere, the standards are very basic. It comes off the back of a truck. Well, it turns out that construction sand is a critical deliverable in the life of a building project. In large cities with unionized workers, the cost of an idle construction team is crippling. So if the sand is late, it can cost you a fortune.
One construction sand company in New York figured this out, and added a performance guarantee to their product. They charge significantly more than their competitors, but Suddenly they have added risk management into the mix. Risk management is a very important thing for a construction boss, with thousands of things to worry about and coordinate.
This illustrates all three of the above points. While you might think sand is a commodity, someone found a way to charge significantly more and to create loyal customers. They created service-level differentiation – appropriate because the product itself is not a good candidate for change. They found a way to create real value for their customers. Customers are pleased to pay more for sand, because they have a guarantee that they won’t be wasting money elsewhere in the construction process.
Classes of differentiation
There are many ways to differentiate a product. Here are some of them, listed in alphabetic order.
- Bundling – combine multiple items into a single price or package to increase value to your customer. This can also help by simplifying the buying process for the customer.
- Cost – reduce the cost (or increase it for an increased perception of quality!). If your product sells in volume, it’s well worth doing pricing experiments in order to understand the elasticity of your market, and if possible to find out if there’s a correlation between customer satisfaction and the price paid.
- Customization – allow customers to specify variants to meet specific needs, or build in the ability for the end user to customize the product. This is used to advantage in many markets (e.g. software “skins”, or with accessorization for clothing or consumer electronics.
- Product features – add capabilities that competitive offerings don’t include. This works so long as the capabilities you add are relevant and interesting to the market – otherwise they can work against you by increasing costs, increasing the complexity of the sale, and confusing the customer.
- Product performance – build a product that performs to a higher level. This is the traditional answer for technology products like computers: more GHz, more memory, more disk, faster graphics, bigger screen etc. Actually one of the insights Intel had was that by segmenting their market they could identify the optimum price / performance combinations for each segment, which increased perceived value and protected pricing for the top end of the market.
- Service – offer support, training, maintenance, after-market or any of a number of service types that increases customer confidence in the product, increases loyalty, and allows you to retain a relationship with the customer. This relationship in and of itself is a valuable differentiator, as well as creating opportunities for you to up-sell new offerings over time.
- Warranty – a clearer promise of quality and customer satisfaction can differentiate your product. In some countries, the statutory warranty is better than others – you may even get credit simply by acknowledging the conditions of the statutory warranty in your product documentation.
These are seven different approaches you can take to achieving differentiation with your product or service. Every product is capable of increased differentiation along one or more of these axes.
The next question is deciding how best to achieve differentiation.