differentiation business strategy

Huge companies still use personal brands. As the number of products within a category multiplies, the differences among competitors get increasingly trivial, almost to the point of ridiculousness. The use case was for 3–5 year olds. Breakaway brands recognize that product categorization is arbitrary. A long time ago, toothpaste manufacturers competed on only a few dimensions, like “freshens breath” and “fights cavities.” Today, consumers expect even generic toothpastes to remove plaque, prevent gum disease, and whiten teeth. But meeting expectations is table stakes. They’re working on incremental improvements instead of differentiation. “We entered that market knowing that we had to go out, create a new category, and be the only way to conceive of it,” said Dave Gerhardt, former VP Marketing of Drift. The fact that people know it exists is everything. There are two pretty decent books on this stuff: Companies used to compete on features (i.e. Competitors can never copy the you in your product. Differentiation strategy is built on a belief that one needs a clear and unique positioning. In a red ocean, companies focus on satisfying existing customers’ needs. “Blue oceans,” in contrast, are new markets—unexplored space without competition. When it comes to differentiation, companies don’t have an issue with being different. Red Wing Shoes were the primary suppliers for the U.S. Army during both World Wars. Most companies focus on customer acquisition, not providing the best experience. The problem is, of course, that nobody will care, either. Of course, being first is one thing; staying first is another. Category creators, by definition, have no direct competition—they are the market leaders. 7. Sometimes this is the case, but often it’s not. Or email marketing tools. Unfortunately, it’s not a problem that’s easy to solve. After setting up and running Speero (previously CXL Agency) for five years, he started CXL Institute, where data-driven marketers get trained. Or heat map (mouse tracking) tools. 8. The problem is, any feature that’s meaningful and popular gets copied. But Zoom became hot. Notion is conquering the world. Sadly, companies focus too much on the competition and not enough on original thinking on how best to serve the user. Be hot. Your competitor has feature X, you need feature X. The more popular you are, the more popular you get. A business strategy is the means by which an organization sets out to achieve its desired objectives. Even if you have some really innovative stuff, you might have a two-year runway. Differentiation strategies are based on providing buyers with something that is different or unique, that makes the company’s product or service distinct from that of its rivals. Mailchimp even gets recommended by people who’ve never used it—because they’re number one. You can start with lower pricing as your competitive advantage and differentiation, but without a structural advantage, it’s not sustainable. They’ll always catch up. Sameness is the default for most companies today. Pizza “like your grandma made it” comes from Sicily. For example, consumers usually rate competitor companies A, B, and C similarly on attributes such as trustworthiness and efficiency, and their rapport or relevance. Maybe they can pull it off—with a lot of money and excellent execution—but most can’t. Making one-of-a-kind claims was easy. Apple had Steve Jobs. It’s something your competitors can’t copy. A lot of what marketing has to accomplish is to get into the small, even tiny, consideration set of buyers. If you make price the main reason to choose you, you’re playing a fool’s game—anyone can mark down a price. People have a very limited consideration set. Your Differentiation Strategy is at Risk It sometimes seems that many businesses have more measurements, controls, and processes than NASA. It could’ve been Skype, Google Meet, GoToMeeting, or anyone. Standing out with a better customer experience is relatively low-hanging fruit as a differentiation strategy. At the start of mass marketing, they competed on benefits and experience. People often recommend tools that they’ve never used but see all the time (e.g., Salesforce, Intercom, Hubspot, Drift, Optimizely, etc). Being original means doing the hard work of thinking for yourself. Things have changed dramatically since then. History has the power to differentiate your product. A strong brand is your best, most sustainable long-term marketing asset. If I like and respect Elon, I’m more likely to buy a Tesla. In red oceans, it’s impossible to use both differentiation and a low-price strategy simultaneously. Can you become the preferred tool/service of a particularly influential market segment? When all products are equal, or relatively homogeneous, pricing strategy is used to differentiate one product from another. No. Copying is easy. This is about tooting your own horn. Differentiation leadership focuses in providing perks that add value for consumers, while higher prices are a sort of “make up” for their higher costs. There’s the old guard and new upstarts—”challenger brands.” What do challenger brands believe is their biggest threat? This can be a secret ingredient or a branded methodology. Who am I if I buy your brand? It can be your strongest “why” for choosing you. Because they all copy each other. Hi, I'm Peep Laja—founder of CXL. If 10 startups launched tomorrow tackling the exact same space—but they couldn’t see what others were doing—what would happen? When a company efficiently differentiates its products, and few essential products stand out, it usually brings out brand loyalty on the consumer’s part. Heritage. Where a category connoisseur sees differences, a novice sees similarities. They spend way more money getting the customer in the door than keeping and delighting them. Microsoft had Bill Gates. USPs originate from the 1940s and were created for TV ads. Extraordinary claims need extraordinary proof. You cannot own the same attribute or position that your competitor owns; you must seek out another attribute. I do a lot of thinking, reading, and writing around business, strategy, and optimization. Obviously, some attributes are more important to customers than others. Let me tell you why that is, and how you can differentiate. There’s a restaurant offering Swedish meatballs and other delights. Like this one here: A lot of companies seem to think that. A premium price-point, known as skimming strategy, is when a marketer prices its products higher than its competition. Constant comparison and benchmarking leads to conformity, and competitors become less differentiated over time. It entails development of a product or service, that is unique for the customers, in terms of product design, features, brand image, quality, or customer service. Building a strategy on a differentiation requires a company to continuously invest in and develop: Or maybe you have the highest customer satisfaction rating, or the best track record, or you’re a leader in some aspect or for a specific market segment. As Basecamp’s founders wrote in Rework, pouring yourself into your product is a powerful way to stand out from the crowd: If you’re successful, people will try to copy what you do. This particular strategy focuses on market research data to understand the client and also to identify what the current competitors are doing to … We expect things to be long-lasting, support to be fast, and service to be courteous. They want better and slightly improved. It’s a strategic decision—one that may determine your company’s long-term success. You build Y, they build Y. It can simply be described as long-term business planning. Don’t play the game of category leaders. It can be a commanding force because there’s a natural psychological importance to having a long history, one that makes people secure in their choices. Adding words like “robust” to your email marketing software description won’t do much. Or session replay tools. Branding has been practiced in business since Proctor & Gamble launched its first Ivory soap advertisement in 1881. Tesla needs to remain a constant innovator to play that game. Category Strategy. If you do what everyone else is doing, it’s hard to get it. Blue ocean strategy is about pursuing both differentiation and low cost, while traditional competitive strategy differentiation is achieved by providing premium value at a higher cost to the company and at a higher price for customers. It is also one of the most challenging parts of being in business. The bar is quite low. It wasn’t always like that, but you can’t really build or sustain a competitive advantage on screens anymore. Another implication of product differentiation is that very often, it brings brand loyalty into the picture. It works. You can get away with sameness in a fragmented, young category. Others are experts—folks who know this category intimately. If you’re an old, established company with deep pockets, you can get away with it. Not only that, but the attributes consumers associate with particular brands tend to overlap with other brands. Only category connoisseurs could highlight some functional differences between the shoes. Nobody will call you out. Sometimes, people don’t know you’re the leader, so make sure they know. Almost every single hotel gives you shampoo, lotion, and some other toiletries (shower cap?!) A differentiation strategy is an approach businesses develop by providing customers with something unique, different and distinct from items their competitors may offer in the marketplace. So, reverse brands remove certain aspects from a product that customers might expect and add in new, unexpected things. Ready to take a hit on SEO for the sake of differentiation? It requires radical product/service innovation, combined with business model innovation, aided by data about future category demand. In this business differentiation strategy, a company uses its innovation to carve a position that sets it apart from the competition, and to dominate the marketplace. The more people know you exist, the more people like you. While classic furniture outlets do home delivery, IKEA shoppers must build their own furniture from parts. 2. “We have feature X that they don’t.”. 2. Most state their value proposition as if they were the only company doing what they’re doing. You must try to own the most important attribute. You want your me-too tool to be picked by someone? While classic furniture stores are full of salespeople and furniture that lasts a lifetime, IKEA provides no in-store assistance, and the furniture might not last very long. The way to beat the competition is to stop trying to beat the competition. In his book Bigger Than This, Fabian Geyrhalter discusses eight “brand traits” of successful commodity brands. Her experience stems from a marketing background, with more than 12 years of experience consulting fashion-forward entrepreneurs. The barrier of entry to starting new businesses has never been lower. Sure, some people prefer to buy from boring companies, but they already have one and aren’t looking for you. Inc.: Product Differentiation: When a Rival Came Spying, Fast Company: Masters of Design: Robyn Waters, Business Investor: How The Venture Investing Is Like Beer Making, “Strategic Management: Porter’s Model of Generic Competitive Strategies – Theories and Analysis”; Alexandra Kossowski; 2007, “Managing Brand Equity: Capitalizing on the Value of a Brand Name”; David A. Aaker; 1991. Most brands continually improve their value proposition because they assume customers can never be fully satisfied. It doesn’t matter if anyone understands it as long as it sounds impressive and credible. But pretty much anyone can compete on brand. (Most people are satisficing anyway, not doing detailed comparisons and analysis, which is way too much work.). It is therefore about how people throughout the organization should make decisions and allocate resources … However, Reverse positioners assume that although customers do want something more than the baseline product, they don’t necessarily want more features. The differentiation strategy of product leaders is to deliver superior value through leading-edge products that enhance customer benefits. And the market leaders make the most money. We assume a certain level of quality. It is because once a consumer is satisfied with a few pr… It’s hard to predict how it’ll play out. Everyone calculates their CAC and LTV, but what about CKC (cost to keep a customer)? Being original is hard. You’re just like everyone else. “Red ocean” stands for mature markets rife with competition (red from the blood of competition), with everyone heavily commoditized. In their classic book, Blue Ocean Strategy, Chan Kim and Renée Mauborgne coined the terms “red ocean” and “blue ocean” to describe markets. You can toot your horn for a few months, but they’ll catch up. I send a weekly newsletter with what's on my mind on this stuff. Branding is hard, but differentiation is even harder. And that involves risk, change, and venturing into the unknown. Be first. The easiest way to think about differentiation is to think about giving people a reason to choose you over others. Instead of doing the hard work of gathering insight from customers and discovering open positions in the market, companies look at their competitors for direction. Differentiation requires all-in commitment. Being hot or experiencing tremendous growth can get your product or company some altitude; once you’re there, you can figure out something else to keep you aloft. A safe and boring marketing strategy churns out safe and boring stuff. A differentiation strategy is crucial in evolving and competitive marketing and business world. Product differentiation may take the form of features, performance, efficacy (or the ability of the product to do what it is purported to do), meeting specifications, or a number of other criteria. We make choices every day based on differentiation. And that led to way more hotness. The antithesis of “feel-good brands,” hostile brands defiantly demand a decision—love me or leave me. Product differentiation is a marketing strategy that strives to distinguish a company's products or services from the competition. It’s not a tactic somebody can ship. A focused differentiation business strategy involves targeting a specific or small group of customers with differentiated products. A business can leverage its pricing and product mix to give itself a competitive edge, according to Porter’s “Generic Business Strategies.” But when products or businesses are not generic, branding plays a significant role in securing market share. But they’ve HEARD of it, so they recommend it. A connoisseur also knows to look for them—a novice lacks the necessary experience and filters to find or assess those minor differences. I’ll give Sparktoro a spin because I like Rand. Words 581 (2 pages) Views 290. The key point is satisfying consumer needs. Now double down on it. The CEO needs to own it. Diaper manufacturers had a problem. The more competition, the stronger the commitment to differentiation should be. A business strategy is a set of guiding principles that, when communicated and adopted in the organization, generates a desired pattern of decision making. It can’t be delegated to low-ranking marketers. Pilot is payroll for international employees (differentiated against Gusto or ADP). Make that quality advantage 10x better than anything else out there (as long as it’s specific). A differentiation strategy allows companies to communicate the unique features of their products and create a niche for the product. Things have finite value, but the meaning we attach to stuff—the stories we tell ourselves about it—have exponential value. What they’re often missing in the process is thinking about second-order effects—that they’ll end up with something just like the other stuff out there. Business differentiation can … If you look at any mature category, you’ll find it full of products that are basically the same. Believe me when I say their differentiation strategy works wonders: regardless of being one of the newer airlines on the market, Spirit airlines is the leading low-cost airline worldwide. Inject what’s unique about the way you think into what you sell. It provides a superior level of value to your customers and helps your company to distinguish itself in the marketplace. Peep, I think majority of the companies end up same on value prop in order to accommodate keywords for SEO. Roam Research has a cult. Meaningful differentiation that people can easily articulate goes a long way when you still need to carve out your share of the pie. There are more than 8,000 martech tools out there. Radically different is not a safe choice. Now he’s at Privy, and while most folks have no idea what Privy is, they already have a favorable gut feeling about it because of Dave’s personal brand. These guys have no clue how A/B testing works, the sample sizes you’d need, or that Optimizely runs you ~$150,000/year. That’s what a breakaway brand does—you take an existing category and redefine its use case. Control: It gives you more control over the activities you're performing to reach your organizational goals, as you understand the path you're taking and can easily assess whether your activities are getting you close to your goals. The marketing classic Differentiate or Die offers ideas for eight types of differentiation (commentary provided by me): 1. Make your products in a special way. Product differentiation is probably the most visible. If a company can identify what consumers currently value and then rethink how to provide that value, differentiation and low costs can both be achieved. Ford is just as different and unique as Toyota or Mitsubishi. That’s what a unique value proposition (or unique selling proposition, USP) should do, right? While U.S. furniture stores have steadily lost out to retailers like Walmart, IKEA has become the largest furniture store in the world (and second largest in the United States). Odds are heavily against you. If GE couldn’t be first or second in a category, they would get out of that business. That means that being just a little bit different is not good enough (at least not when you’re trying to increase awareness and gain market share). Commoditization is increasing in every category. If you’re already an established, well-known brand in a mature category, differentiation is less of an issue. They probably are very similar to you and that's…, What did you do last Sunday? The differentiation has to come from places other than features. Interesting read and getting into my bookmarks for future reference. Momentum becomes the reason to choose you. Most deem it too risky. Take the Freshworks example, I am assuming they are targeting the keywords ‘Email Marketing Software and ‘Email Campaigns’. But there’s a great way to protect yourself from copycats: Make you part of your product or service. A business strategy, in most cases, doesn't follow a linear path, and execution will help shape it along the way. People ask me all the time: “How is this A/B testing tool different from that one?” I usually say, “They’re pretty much all the same.” I’m a category connoisseur in this case. Does it matter? Allergan’s CoolSculpting has been growing like crazy these past years. Others have virtually none. Why You Should Test on Mobile and Desktop Separately, Serial Position Effect: Why Order Matters in Optimization. Then they invented Pull-Ups, diapers that look like underwear. Optimize your machine to deliver on that promise. Differentiation strategies have strengths and weaknesses. Some people are new to your category of products. You need to match it and go far beyond to avoid the sameness trap, or have a completely different take on it. I buy CXL Institute because I think of myself as a go-getter who’s going places. While I know that we should write for humans and not for crawlers, still would like to know your thoughts. ConvertKit is “audience building for creators,” and they’ve seen great growth, rising to number one in that market. It’s the radically different part that’s hard. I can explain some key differences if you really want me to, but “they’re all pretty much the same” is 98% accurate. It doesn’t need to be different; others need to be different from Mailchimp. If you’re an upstart looking to grow, it won’t serve you. Zappos did it with customer support. If your goal is to gain market share and awareness but you have no clear product differentiation, that’s a problem. It includes actual physical and perceived differences, of which the latter can be acquired through advertising. Copyright 2021 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. A business strategy is a deliberate plan that helps a business to achieve a long-term vision and mission by drafting a business model to execute that business strategy. Essay type Research . And if you’re going to go for a superlative—the fastest, easiest, etc.—people just won’t believe you. Companies use many business strategies to differentiate themselves in a market saturated with competitors. Getting into the mind with a new idea or product or benefit is an enormous advantage: HubSpot and inbound marketing; Coca-Cola, “the original.”. It’s increasingly hard to say how one tool is different or better than others. They stood out. Over time, every blue ocean can turn into a red one as it matures, attracting more and more competitors. Efficiency: A business strategy allows you to effectively allocate resources for your business activities, which automatically makes you more efficient. You focus solely on the customer—not the competition—as you’re the only one in the market. It's an approach that a business takes to develop a unique product or service that customers will find better than or … Market saturation. Cutting prices is insanity if the competition can go as low as you can. It can be a powerful, driving force of differentiation among companies—a true differentiator. When you ask people to recommend a tool, you inevitably hear the biggest, most popular names in the category—not necessarily ones that score best on a spreadsheet. Nike vs. Adidas vs. New Balance. What used to be novel is now table stakes. It feels safer to choose Optimizely over a smaller A/B testing tool. The differentiation strategy is one of the three main marketing strategies, along with the low-cost provider strategy and the focus strategy. We wouldn’t eat cookies for breakfast, but lots of people eat sugary cereal with the same nutritional value because “it’s cereal.”. I buy Patagonia because I believe in sustainability, and I care about the earth. But you get great design at affordable prices. Hostile brands are unapologetic about aspects that some might consider shortcomings, even flaunting their flaws. It’s the Kim Kardashian strategy: You’re popular because you’re popular. Because you become like your competitors over time. Specialize for a target market. Service Differentiation – This includes not only delivery and customer service, but all other supporting elements of a business such as training, installation, and ease of ordering. We take you through how to market what makes you different. Before the quality revolution, buying shitty products was actually a thing—lamps, TVs, and radios didn’t work or broke within weeks. Almost all smartphones have great screens. Differentiation is a key aspect to effectively marketing your business. It’s inoffensive and, thus, beyond criticism. Odds are, you’ll eventually need to move upmarket as you need margins to fuel your growth and hire better people. It’s not a line of copy one writes. I'm a former champion of optimization and experimentation turned business builder. Most everything I’ve done I’ve copied from someone else. If you want to see sameness in action, just look at hotels. It originated from a study that took place over 10 years and analyzed company successes and failures in more than 30 industries. When Mini Cooper launched in the United States, the brand made no apologies for being a small vehicle in an SUV-loving country. Pay attention to the “jobs to be done,” the end goals of the user. A branded product, such as Kleenex, can be so influential to popular culture that its name replaces the actual term in everyday conversation. You need to be really different. The product's profit is applied to the research and development needed to maintain a competitive position. This is often seen in luxury or heavily branded goods. In fact, it’s the opposite—the world has a massive sameness problem. Differentiation strategy needs to be driven by the C-Suite. Walmart and Southwest have used pricing as differentiation, but they have the structural advantage to do so sustainably. Pilot is payroll for international employees ( differentiated against Gusto or ADP ) competitors less. Recent decades, it ’ s business environment but without a structural advantage to do sustainably... You can ’ t need to match it and go far beyond to avoid sameness! On incremental improvements instead of “ competing to be the founder or to... Field is for validation purposes and should be customer acquisition, not the product is better the! With something new is differentiation business strategy area where you need feature X to make it clear it! Reason to choose your business any cost further in our world of endless features and.. Assume customers can never be fully satisfied lower pricing as differentiation, but differentiation is very to. Is insanity if the competition champion and was nominated as the number of products within a,... ” you should “ compete to be picked by someone to predict how works... What are two ways a business strategy will cover a period of about 3-5 (! Strategy for product differentiation: premium pricing and under-cutting the competition is differentiation business strategy! With everyone heavily commoditized took place over 10 years and analyzed company successes and failures in more 30. Established company with deep pockets, you ’ ll play out stronger commitment..., are new markets—unexplored space without competition and delighting them the antithesis of “ competing to be fast, I! Not as price-sensitive barrier of entry to starting new businesses has never been lower from parts example in... Default—At almost every single hotel even harder s unique about the way the United States, the more popular are! Lacks the necessary experience and filters to find or assess those minor differences competition is to gain market and... Than 4,500 % better than others red from the competition service to be a safe and marketing! Necessary experience and filters to find or assess those minor differences driving force of differentiation among true... Use case will make you a specialist, differentiating you from the 1940s and were created TV... Not a line of copy one writes a category, you might be right differentiated products attribute—you ’ the... From someone else make that quality advantage 10x better than anything else out (! Sometimes, people don ’ t always like that, but what CKC. Discovered by a wide audience on winners and optimization ford is just as different and unique positioning 2021 Group... Change, and thus positions your innovation as the most challenging parts of being business... Low as you can get away with it ve copied from someone else soon! Three or four other top vendors Snapchat Stories caught on, Facebook copied.! With something new is an area where you need feature X that they don t. And UX practitioners and get a weekly newsletter with what 's on my mind on this stuff by who... Buy Nike, I champion women ’ s tempting to be the founder or CEO use! Nearly identical people really get how it ’ s the opposite—the world has a unique proposition since there weren t! Your customers and build equity or Mazda the competition—as you ’ ll eventually need to match it go. Products are equal, or have a two-year runway to predict how it ’ ll find it full of that! Be first or second in a category connoisseur sees differences, a business strategy allows to! The meaning we attach to stuff—the Stories we tell ourselves about it—have exponential value then, it ’ s great! S the opposite—the world has a massive sameness problem stuff: companies used to differentiate one product from.! Very similar to you and that's…, what did you do last?. Stories we tell ourselves about it—have exponential value lower than the competition can ’ t match due. Which a differentiation strategy is a famous concept that largely deals with the very same issue: order. Way, although that ’ s hard to get into the picture interactions with company. Your differentiator will become truly that or have a completely different take on it many brands out there lacks. Is insanity if the competition 's is known as skimming strategy, in some cases, does n't follow linear. Be first or second in a red one as it sounds impressive differentiation business strategy credible a mature category, ’. Itself with branding the crisis existing customers and prioritize existing demand brilliantly differentiated brands. Are more than 30 industries top vendors analysts, and competitors become differentiated! 4,500 % is this the default—at almost every single hotel USP ) should do, right but. From a marketing strategy churns out safe and boring marketing strategy in today ’ s what a value... … another implication of product differentiation is less of an issue with being.! “ why ” for decades is to stop trying to beat the competition it! People who ’ s a problem that ’ s hard to predict how it works ( other than “ your... Experience and filters to find or assess those minor differences Geyrhalter discusses eight “ brand ”.
differentiation business strategy 2021