Product differentiation strategies are the well-thought out and purposeful set of actions you take to highlight aspects of your product or service that are unique and most relevant to your customer.

Apart from the fact that it is really hard to create a unique product of service, it is even harder to cut through all the clutter, and having a shiny new product or the best service out there is not enough to get you new customers.

In our recent daily perspective about cutting through the clutter, we asserted that even though some companies have successfully faced off with their competition, you will still need to ask yourself the difficult question,

Do I have the differentiation, capital and resources to beat the competition at their own game?

What if I told you that even if you created the perfect product or service, no one would notice? Harsh, I know. But often true. Fortunately, there is a solution – it’s called ‘positioning‘.

Product or Service Positioning

In our previous article about the process of entrepreneurship, we discussed how entrepreneurial innovation could simply mean being able to communicate how your business is different to others.

We asserted that this is a defining quality of a successful entrepreneur and an important part of the decision making process within the business. Positioning your product or service is an example of this communication.

Positioning your product or service in the mind of the customer is key to setting yourself apart and occupying a different place in the customer’s mind. If you know that competitors will have more features (because they have more money), great positioning takes the focus off the features of the product and is the best way to separate yourself from the competition.

Most early stage companies focus on the development of a great product or service but overlook the importance of positioning, and true positioning takes great vision and thought – not just more Facebook likes or Twitter followers. Did New York City need Starbucks when it launched? Probably not – there was already great coffee in NYC. But Starbucks positioned itself as a special place. Positioning is sometimes even more important than product in a crowded marketplace.

So Why Is Product Positioning So Important?

  • It helps you compete when you don’t have better features, prices or functionality than your competitors.
  • It helps you create clarity in the mind of the customer and make them believe that you are the best choice in a sea of competition.

How Can Your Business Position Products or Services In a Competitive Marketplace?

Your business can position products or services by:

  • Telling a unique story
  • Targeting a specific group of people
  • Doing one or two things very well
  • Providing a level of service in industries not known for service

It all starts with telling a unique story, one that your competitors are not currently telling. Let’s take MailChimp for example, they are the largest marketing automation platform in the world. They have expanded their product offerings from just email marketing to now offering Google re-marketing, Facebook ads and business analytics.

Product Differentiation Strategies | Mailchimp Example

They promote their products to a very wide audience and for that matter, they might not focus as much time and development on their core audience which was always small businesses who need effective email marketing.

Even though they might have seen great opportunities with the other products, there are a lot of MailChimp alternatives that are popping up and are honing in on a specific audience and building features that audience love.

One such example is Campaign Monitor. One of their product differentiation strategies is to position their product by building specific features that designers would love instead of building the product and then trying to sell it to designers.

Product Differentiation Strategies | Campaign Monitor Example

They do a pretty good job of conveying this message across in their storytelling and the language they use! Even though Campaign Monitor may not be able to compete with MailChimp in some ways, they have positioned their product to compete by focusing on a niche and doing one thing very well – creating beautiful email templates for designers.

This is just one example of how one company is differentiating their product in a competitive market. As you can see, product differentiation strategies work effectively when they are well thought out and communicated effectively with your team and your potential customers.

Differentiation Strategies

There are primarily 6 ways to differentiate, These include:

  • Product Differentiation – Creating a product with better features, performance or efficacy. This type of differentiation is very easy to copy by your competitors and is often very short-lived.
  • Service Differentiation – This includes not only delivery and customer service, but all other supporting elements of a business such as training, installation, and ease of ordering.
  • Distribution Differentiation – Your chosen channels of distribution can provide coverage or availability, immediate access to expertise, and greater ease of ordering, and higher levels of customer or technical service.
  • Relationship Differentiation – An often overlooked means of differentiation is through company personnel. Employees, associates, or team members with customer interface can provide and demonstrate competence, courtesy, credibility, reliability, and responsiveness.
  • Image/Reputation Differentiation – Image is controlled and managed by symbols used in communications, advertising, and all types of media — written, digital, and audio, as well as the atmosphere of the physical place where customers encounter the business.
  • Price Differentiation – Successfully competing on price requires recognition that every customer has a different price they would be willing to pay for your product. Segmentation and differentiation allows a business to come close to maximizing the potential revenue by offering each segment a differentiated product at a different price.

For a more in-depth explanation of differentiation strategies and how they can be applied to your product or service, check out our online course.

Choosing Product Differentiation Strategies

As mentioned above, you have six ways to differentiate, by product, service, channels of distribution, relationships, reputation/image and price. It is up to you to analyze your existing market and decide on which methods are more important invest in.

By creating product differentiation strategies for your business you stand a better chance of competing against other companies that are larger and have more money to spend.

If you want to learn more about product differentiation strategies and join a community of great entrepreneurs, check out our learning community.