One of the war cries that business owners hear over and over from marketers is the need to adopt a differentiation strategy as one of the most critical things that they can do in order to have an advantage over their competitors. This is simply a business strategy in which a company tries to gain a competitive advantage by providing a unique product or service or unique brand.
Simple right? Well, not so fast. The piece that is often missing or not communicated as well is that for a differentiation strategy to be effective, it not only has to be different, but it must be valued or useful to your clients or target market. It does little good for a company to go to market with a different product or a different type of service if that product or service is not useful, beneficial or valued in some way by your clients and target market.
When working with business owners, I always begin by developing a strategic plan before implementing a tactical plan. One of the key elements in the process of developing a strategy includes developing a differentiation strategy. In some cases, a business may already be providing a unique service or product but they aren’t doing a good job of communicating this to the outside world or to their customers and prospects, so their business looks the same as their competitors. Other times, it’s necessary to determine what the core competencies and strengths of a company are and then create a strategy that is different, useful and valued by the target market. But, before the process of determining a differentiation strategy can take place, it is critical to find out whether what we are thinking of adopting, is useful and valued by the target we are attempting to attract. And the best way to do this is to go out and ask your customers and prospects about what they would find valuable, useful and in many cases what type of innovations they would be willing to spend more money to receive.
Here’s an interesting twist to the differentiation strategy story. Sometimes for a company to be different and valued, they only need to change or stop doing something that their competitors are doing, but is a source of frustration with their target market. A great example of a business changing the rules of the game is the differentiation strategy adopted by cell phone provider, Metro PCS. After identifying the common frustrations many cell phone users were experiencing with their cell phone service providers, Metro PCS adopted the differentiation strategy of providing a no contract, no activation fee, low unlimited monthly service to their customers. In the process, they have started to get the “big” boys to take notice and adjust some of their offerings.
Here’s a couple of questions you can ask your customers to determine if your differentiation thoughts have “legs”:
- What are the biggest frustrations you have when doing business with (your industry)?
- We’re thinking about offering (a proposed innovation). Would that make a difference to you?
- Would you be willing to pay more for (the proposed innovation)?
- What problems would you like to see solved in this industry?
The answers you receive to these questions will help you determine if your assumptions are valued and useful to your customers and prospects.
To your success,