On B2B Competitive Differentiation

THE POWER OF 'WHY' (SHOULD YOUR BUYER CHOOSE YOU) COMPELS YOU!

“And the enemy is one time I ain't gotta tell you
It's right in front of your eyes.”
-Mobb Deep, “Hell on Earth”

The root of all good marketing, the literal heart of it, is your competitive differentiation. Why on earth would anyone buy from you?

It ain’t your friendly customer service, buck-o.

Don’t write this off as one of those frilly things that don’t affect your business.  A strong competitive differentiation is the most critical component to the future success of any organization.  In its simplest form, this is answering “why would a customer choose my company?”  Competitive differentiation is the only element that consistently distinguishes you from similar competitors and gives the buyer a compelling reason to select you.  It doesn’t matter how unique your idea is or how amazing your hair looks, lack of a strong competitive differentiation will prohibit you from acquiring and/or retaining business.

In order for a competitive differentiation to be market viable, all three of the following must be true:

  • Relevant to the market
  • Not easily replicated
  • Verifiable/actually true

Those three constraints, should they all be held true, limit the possibility of differentiation to something more manageable.  Here are the categories of differentiation or mechanisms by which an organization may answer “why?”:

  • Product Differentiation - Examples include performance, features, design, etc.
  • Service Differentiation - Examples include warranty, ordering ease, installation, convenience, etc.
  • Relationship Differentiation - Examples include great customer service, courtesy, credibility, responsiveness, etc.
  • Brand/Reputation Differentiation - Examples include social perception, communication, marketing, advertising
  • Price Differentiation - Examples include budget/low pricing, high pricing for exclusivity, etc.
  • Distribution Differentiation - Examples include delivery speed, delivery method, etc.

It’s worth noting that about 80% of the clients that I have ever interacted with list “customer service” as their primary differentiator.  Rarely, and I do mean rarely, is this actually true.

Customer service as a differentiation can exist, but it has to be absolutely amazing to be a differentiator.  Think Trader Joe’s, Amazon, and Costco.  All three of those are ceaselessly committed to the customer’s satisfaction to their own loss at times.  They are actually globally known for their exceptional customer service, yet they do not rely upon that as their chief differentiation.  That’s the caliber that one must think of when considering customer service as a competitive differentiation.

Though it is a deviation from conventional wisdom, in today’s markets, price and product do not pass the litmus test 99% of the time as viable or long-term competitive differentiations either.  They are both easily replicable.  Distribution is doable, but very tricky, given the Amazon Prime culture that we have groomed over the last decade.

An organization that I worked with, prior to Amazon’s prevalence as the ONLY subscription distribution method in town, differentiated themselves by offering a product that your home needed regularly on a subscription model.  You would subscribe to their service and every few months, when your home needed this particular product changed, a replacement product would show up at your door.  They did so well at this type of fulfillment and people wanted it so much that the company was able to close three funding rounds successfully and hire 125 souls aboard that Titanic of a startup.

In December of 2019, they laid off half the company.  I doubt the organization will see 2021.

When I worked with that company, I begged them to diversify their offering and model, as Amazon had just started heavily pushing consumers towards the Subscribe-And-Save program at the time.  I felt like Subscribe-And-Save would put this company out of business, as why on earth would anyone sign up for their service when you could get the same thing with Subscribe-And-Save without maintaining yet another subscription with another no-name company.  The organization’s leadership balked at me and touted their brand value and that people would stay.

Fast forward five or so years and two rebrands for that company, and the writing is on the wall.  It’s unfortunate, as in a situation like that, being the “doomsday herald” isn’t a pleasurable job.  Saying “I told you so,” is the least rewarding thing in the world.  That company was attempting to use distribution as a differentiator and didn’t incorporate or account for Amazon into their overall strategy,  This was their death warrant and absolutely heartbreaking.  In the case of price as a differentiator (coupons, value, etc.), companies gain a transaction, not a customer, when you undercut the rest of the market.

If there is a universal truth to be had in business and marketing it is this:  someone will always have a cheaper product or newer widget than yours.  Price and product as differentiators never hold water because of this.  They simply aren’t lasting values that answer “why should the target market buy from me?” in a way that can outlast fluctuating markets.

Service, relationship, and brand/reputation differentiation are the most sustainable and successful differentiation.  If you wanted the cheapest TV you could purchase for your daughter’s treehouse, would you even remember the brand name, barring any extraneous circumstances?  However, if you were buying a new TV for your living room, do you immediately go to price?  Or do you have some built-in loyalty for Samsung, LG, Phillips, etc.?  Whether the purchase is B2B, B2C, B2B2C, product-based, service-based, or any other possible combination that can be imagined, an individual with human-purchasing-patterns makes the buying decision.

If a target market is not moved by saturation, wouldn’t price move them? Either by elitist, exclusive pricing (a la Gucci, Louis Vuitton, etc.) or bottom-of-the-barrel discount pricing (a la  Family Dollar, Budget Rent-a-car, etc.)?  Sure, but that movement is tied so intrinsically with pricing that it has no staying power whatsoever.

For B2B organizations, the answer largely relies upon relationship and brand/reputation differentiation.  How does one market a relationship differentiation or actually achieve brand/reputation differentiation?

Organizations will simply not be able to succeed in evolving markets without a strengthened, consistent competitive differentiation that emotionally moves their target market. This has to be more than words.  It has to be something truly different.  And it can’t be bullshit.

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