We are living in what has been described as a society of surplus.
There is almost no product or service sold in the United States today that does not have a comparable substitute. This has created such a high level of consumer choice that businesses constantly are developing new, slightly modified versions of their products to help set them apart, or applying their current brand to a new category (referred to as brand extension). They’re fighting against a big killer of profits, which is the commoditization of their product or service. It happens when a brand loses it’s uniqueness because there are enough similar options available, thus causing consumers to settle for whichever product or service is offered at the most convenient time or place.
Examples abound in daily life and a look at convenience foods is an easy place to start. From pop (or “soda” or “coke” depending upon where you live) to chips, snack cakes to chocolate bars, everyone can name the “original” and a “knock off” version easily. And when it comes to taste, for most consumers, close enough is good enough. To stay relevant and to keep the doors open, every business must differentiate.
Simply put, this means defining what it is about your product or service offering that sets you apart from your competitors. There are a number of basic ways in which to do this and most stem from a value proposition first being defined, formally or informally.
For example, you may decide that you want to be a “low-price leader” and compete on price. If you’re cheaper, everyone will choose you over more expensive options, right? This approach leaves little room for profit and competitors with better buying power may come into your market and drive prices lower than you can match.
Alternately, you may want to lead with the best possible service to your customers and set yourself apart in this way. Your challenge is to create a company culture that reflects this and it often requires higher costs to support more staff or a more thorough process – or whatever it takes to achieve.
Perhaps it’s breadth of service that you want to hang your hat on, not the best service or lowest cost, but the widest array of options. Again, there may be drawbacks to this: potential stale inventory or underused equipment that doesn’t contribute enough to profitability. In all instances, others in your market may have already claimed these positions, or differentiators, as their own and you likely won’t see much success being a “me too” option.
One option for differentiation that seems to always remain a viable choice is to align your business with what’s new in your industry. Simply being first does not guarantee success, but in many cases, it can give you the competitive advantage you need to grow your business or at the very least defend the business you already have; if only for awhile. Technology is often a driving force in bringing “new” to industries of all types.
It’s best to refer to trusted industry sources like trade associations along with anecdotal evidence supporting the claims made about the technology contributing to an increase in sales, reduction in costs, or other features that would be viewed as benefits by your customers ultimately improving your profitability.
Becoming an early adopter of the right technology can go a long way to differentiating you. In fact, technology only is a differentiator if not everyone is using it. Noticing trends and being in tune with your industry will help give you an edge. If you choose to be an early adopter, be prepared for a few trade offs in features or performance, even stability at times, in exchange for the competitive advantage you gain by being one of the first with the new technology. Know that technology always gets better, faster and cheaper. As it does, the impact of the competitive advantage, what helps to differentiate you, diminishes. Not to say it goes away entirely, but when everyone is using the technology, you’re back to facing the threat of commoditization, and thus need to focus again on differentiation.
Every business must differentiate. It’s an evolving process and as competitors jockey for position in the marketplace, you’ll need to constantly reevaluate how you are different. Doing so will keep you from becoming a commodity and contribute to long-term success.