Differentiation: How It Can Make Or Break A Business
What do Jet Skis, Hoovers and Velcro have in common?
They’re all brand names that have become shorthand for their respective categories. No-one asks for a personal watercraft, a vacuum cleaner or a hook and loop fastener. We all fall back to the brand name, and everyone understands.
Owning a category as these brands do is a differentiation utopia that is tough to achieve. But differentiation shouldn’t be ignored: it can make or break a business. Getting it wrong can gradually eat away at your bottom line to the point that you’re only competing one way: price.
The good news? Marketing can help.
Differentiation problems: The symptoms
An undifferentiated business will see decreasing returns on sales and marketing activity: it has to work that much harder to generate the right attention, opportunities and leads. With a dwindling pipeline, they’ll start to see a gradual decline in profits, too. Many businesses combat this by discounting more and fighting a battle on price alone: Red flags all round.
If you find yourself struggling to explain what your business does differently, if your marketing materials are full of cliché and lack depth: lack of differentiation is likely the cause.
Aside from the impact on marketing ROI and the bottom line, don’t ignore your gut. Many business owners know in their heart of hearts that they’re not saying anything different to any of their competitors. This can have a dramatic impact on motivation and drive: and if the owner’s feeling it, the business will feel it too.
What happens if you don’t tackle differentiation issues?
Differentiation is one of those business issues that sneaks up on you. It’s never top of the priority list, but when it hits, you’ll know about it. If you leave the fire burning, you will experience a decline in growth momentum, and the amount of work you have to put in to generate business with become apparent. You’ll also be forced to compete more on price where once you didn’t.
Look at supermarkets’ own-brand products: They don’t market themselves, there is no branding, they don’t offer anything different to the rest of the shelf - on purpose. They are specifically designed to compete with the likes of Heinz or Kellogg’s on cost alone. If you’re like everyone else, you’re Tesco Value, and your Beanz Meanz differentiation issues.
How can you break through the differentiation barrier?
In marketing, there are givens, and then there are differentiators. Givens are vital: without them, customers won’t do business with you. A quality product; knowledgeable people; excellent customer service - you need these just to be in the game. They’re the same things that your competitors boast of too.
Dove, for instance, was a quality if serviceable personal care brand. In 2004, it launched the Campaign for Real Beauty, a campaign that redefined the accepted norms of what beauty was. Instead of the usual skinny models, the brand put normal women front and centre.
It set out a mission - a brand value that persists to this day. Crucially, it had a huge impact on the bottom line, too: Real Women led to a 700% rise in sales of Dove in the first half of 2005.
Closer to home, financial advisory firm Menzies was known as a high quality and effective business, but a slew of low-cost online accountancy solutions had begun slowly eating into their profits.
The goal was to find the position that would best serve their purposes, that would fit and enhance the existing Menzies culture. The outcome of this was ‘Brighter Thinking’: a concept which conveyed how Menzies wanted to portray themselves, but also encapsulated what their target audience was looking for in a long-term relationship with an accountancy firm. Customers needed to hear “we know you can’t play quick and fast with a customer’s finances. You need smart people making smart decisions.”
For Dove, they differentiated by talking outside the product itself, aligning it with a movement - a campaign. For Menzies, it was about highlighting their finance and accounting expertise, combined with strategic commercial thinking. Neither, you’ll notice, mentioned price.
Where do you start?
As with a lot of marketing, the right differentiation depends: On you, on your audience, your culture, your competitors. However, there are a few exercises to get you thinking the right way.
Exercise 1: Imagine that you’re sitting at a table. On the one side is your business and all your competitors, and on the other side are your customers. Each has one sentence to convince the customer to use them instead of the competitors. What would you say?
It’s important to realise that this meeting does take place every time a customer decides on a specific brand/service/product to buy. The only difference is, it happens in their minds.
Exercise 2: Answer these questions:
- How do you solve your customers’ problems?
- Why would they come to you?
- Why would they NOT come to you?
- Why not a competitor?
- What do you know about your competitors…?
Exercise 3: Fill in the blanks:
At Competitor 1 we….
At Competitor 2 we….
At Competitor 3 we….
At our business we….
These might seem like straightforward questions, but they can also be painful. If you can’t answer these questions, you need to find a third party who can help - an outsider’s point of view is invaluable when you’re so closely tied to the everyday operations of the business.
What is the outcome of differentiating your business?
The benefits of a truly differentiated business manifest in a few different ways. First, are all the benefits that come with having a strong brand: more profit, lower cost per acquisition (CPA), a more valuable business, growth.
You will be able to say with confidence who you are, what you do and why you do it. You’ll be able to say the business helps [X] to do [Y] by doing [Z]. You’ll have carved out your niche within the market, and be able to explain exactly what it is you do that your competitors don’t.
On the marketing front, you’ll be able to explain what you do to people easily, without falling back on tired clichés or ‘givens’ to explain your positioning.
Lastly, your business mindset as a whole will improve once your vision is clearer. Differentiation carves a niche in the market, inspires everyone within the business, focuses the company mission and revitalises the brand’s momentum and growth.
If you find yourself competing on price, if your cost per acquisition is increasing or if you simply know that your business is saying nothing new, differentiation - or lack of - is often the root of the problem. Pull the business apart and work out what it is you do, where you sit in the market and how you differ from the competition, and you’ve created a platform to break through the growth barrier.
Get it right, and you’ll notice the difference to your bottom line.