Business managers are constantly being told to “be different”. There is a widespread belief that different is good, and that the greater the difference, the better.
Managers often struggle to find the one differentiator that they think will lead to untold riches. However, there are many ways that differentiation for success can be achieved, some of which come much more easily than others.
The principle of “being different” and specifically the need to differentiate from the competition is a core message of the work by the world famous business guru, Professor Michael Porter. He argues that for a business to be successful, it must either have lower costs than the competition or differentiate itself from the competition.
Although sounding attractive initially, the lowest cost option is fraught with dangers as it pits the business directly against larger companies that have both greater economies of scale and financial muscle. This option is rarely sustainable in the long term and is not generally recommended for small businesses to follow. So this leaves the alternative strategy of differentiating – being different.
Those who believe this works do so because of the principle that customers are prepared to pay more for something that specifically meets their needs or requirements, compared to a lesser product or service which is only partially satisfactory. Additionally, people pay for quality.
The effectiveness of a differentiation approach is shown by a quick look at the Sunday Times top 100 Growth Companies list – the list is almost exclusively made up of firms who differentiate themselves from their rivals.
So, how can a business differentiate itself?
The first key step is to understand and clarify how your business may be different. It is vital that your position is clear as this will ease customer understanding and the communication of business issues. There are three things to consider.
Variety: Customers may come to you because you have a particularly good variety of products or services to sell. They know they can buy a good range from you and this makes purchasing quantities of different items easier and quicker. Retail examples: Department stores and supermarkets.
Needs-based positioning: Customers may buy from you because you are able to meet their specific needs. This is the position most niche providers take. For examples, think of any companies you know which aim to address a specific need, desire or request. Retail example: Hi-Fi specialist
Access-based positioning: Customers may buy from you because you make your company available in a way that is attractive to them. People are increasingly cash-rich but time-poor so being able to shop when and where it is convenient is becoming ever more valuable to them. The internet is growing on the back of this. Ease of shopping, when compared to travelling to a bricks and mortar shop, is a major driving factor in the popularity of the Web experience. Retail examples: Local “corner shop”, downsized supermarket outlets at petrol stations & 24 hour shops.
Meet Your UCD
Once the business has established which of the three above positions it is taking, it is necessary to articulate your company’s Unique Core Differentiator. This UCD is the fundamental message that all communication must convey so that the market knows simply what makes this business different from everyone else.
There are many advantages to knowing your UCD and communicating it clearly to the market. These include giving customers a clear psychological reason to buy from you, improving marketing results and providing focus for your team.
First you must establish what your UCD is or will be. There are three options to choose from. Which of the three is most appropriate is a highly individual matter and will vary, depending on the company’s status, position, location and product or service among other things.
There are companies whose business or product or service have a genuine tangible difference from rivals.
Creating your UCD in this case means expressing that unique quality in a way that is meaningful to customers.
Usually, any unique quality that provides a competitive advantage is not sustainable in the long term as rivals will try to copy it. Therefore, to retain position you must be prepared to continually ‘re-invent’ yourself.
This is where a point of differentiation is created or consciously manufactured. This may include a guarantee which no other business is able to offer, or a special form of after-sales service. The key to creating a powerful UCD is to look at the frustrations customers have with the way your industry does business, and try to find a way of doing things that overcomes this frustration.
A Unique Core Differentiator does not have to be unique, but must be perceived to be unique. You may simply be the first to articulate your differentiating factor or state its benefits in a particular way. Taking this approach can result in your business being seen as a market leader, simply because it is the first to give a particular message. Advertising and marketing provide huge scope for developing this opportunity as it is all about perception.
Using these ideas, a business can differentiate itself from the competition and carve out a valuable space in the market. Positioning in the marketplace is often a highly strategic activity and should not be rushed. Seek external advice where necessary. Remember, smart business owners know their limitations and when to ask for support.