Think beyond transient differentiation

In a world full of products and services that look alike, small business owners in particular need to give more attention to making their business stand out from the pack.  This is not easy but the value of doing so is massive.

Put yourself in the shoes of one of your prospects.  If you plan to buy something and find several alternative suppliers all providing what seem to be identical products, which do you buy?

You will buy the cheapest, of course.  There is no point spending more than is necessary.

This means when you are competing with competitors all selling identical looking products, you will win sales but only if you are the lowest price suppler.  When this happens, one or more of your competitors will lower their prices to tempt future prospects to buy from them instead of you.  This downward spiral of prices spells disaster for your small business because your profit margins keep falling until you are making no profit at all.

What is happening here is the lowest priced supplier is using price to differentiate their product from others in the marketplace.  Unfortunately, lowest price is only a transient differentiator because it is so easy for other suppliers to reduce their prices to the same levels.

All attempts to differentiate your business with transient differentiators will ultimately fail.  It is easy for one or more of your competitors to match your point(s) of difference and neutralise your advantage.  So, your moves to offer lowest price, next day delivery, money back guarantees, interest free repayment plans, free installation, removal of old equipment and extended warranties will all fail to give you a competitive advantage.

As you can see, any differentiation you devise and implement quickly can be copied and neutralised by your competitors equally quickly.  You should be exploring ways your clients can benefit by buying from you which can’t easily be replicated by your competitors.  There are two areas to concentrate on developing.

Firstly, building some new feature into your product’s next release that will greatly benefit your clients, but which you competitors will find hard to replicate.  A good example might relate to the family car.  A feature like automatic transmission or anti-lock brakes gave the first car manufacturer to implement these a key advantage over their competitors for several months, possibly as long as two years.  Rival vehicles could not simply be retro-fitted with these features, they had to be designed into a later version of the model.  For cars, a typical design cycle would be 9-12 months as engineers work to bring an idea into reality.  For this period, the first manufacturer has a tangible point of difference that can be exploited in its marketing campaigns to gain market share.

Of course, as soon as other manufacturers can offer the identical feature, this advantage is lost.  All your products should have an ongoing research & development cycle which aims to keep them ahead of the competition with new features of high value being introduced to benefit your prospects.

The second way to build some long-lasting differentiation into your small business is to use the unique combination of skills and expertise of your people.  Imagine you had products that were similar to your competitors but you had the advantage of employing the recognised industry expert who was available to help and advise your clients on getting the most from your products.  By having the expert in your business, you have the opportunity to structure some consultancy services which involved the expert in some way.  No competitor could match this benefit, unless they were to recruit your industry expert.

It is a simple process to develop one of your employees into a widely acknowledged industry expert.  It takes consistent effort over a number of years to develop the in-depth knowledge and gain the range of experience required to become an acknowledged industry expert. The first decision to make is to identify the person you want to represent your business as the industry expert.  In many cases it will be one of the original founders of the business, individuals who will be unlikely to switch to a competitor.  This is probably the biggest risk when selecting the individual.  The next biggest risk is selecting an individual doesn’t have the commitment and drive to do what is needed to gain the necessary knowledge and visibility.

There is no room here to look at the steps involved in becoming an industry expert.  In broad terms, it calls for regular writing (articles, eBooks, blogs and posts on social media), wide visibility in the media, networking and giving presentations.  It requires the individual to be on top of all major developments in their industry and to be prepared to comment on them, either in the media or on social media sites.

As you can see, developing lasting differentiation for your business isn’t simply a reaction to losing some sales and trying to change your fortunes overnight.  If you follow that path, you will inevitably end up with elements of transient differentiation.  You should be striving for longer-term semi-permanent differentiation.

ACTION IDEAS

  1. Look at how you currently differentiate yourself and identify how successful this is in the medium term.  Do a similar analysis of your main competitors and identify if they are more successful than you at protecting their points of difference.
  2. Decide to develop one person into a widely acknowledged industry expert and produce an action plan for writing an eBook plus associated articles.
Posted in Differentiation