How can we create products and services that are different from our competitors’ products and services and that are uniquely beneficial to our customers? In short, how can we create a higher value proposition in the minds of our customers? Differentiating Your Products
In the perpetual opening game we’ve been describing, companies also strive to design or redesign products and services that are differentiated from their competitors. The challenges companies typically face in product differentiation can be profound:
How can we create products and services that are different from our competitors’ products and services and that are uniquely beneficial to our customers? In short, how can we create a higher value proposition in the minds of our customers?
How can we package or deliver this value proposition in a uniquely beneficial way?
In choosing providers, what is most important to our customers, and how much impact do our differentiators have on their buying decisions?
How can we create enough added value in our products or services to justify a higher price, if that is our goal, or how can we achieve a unique value proposition at a lower price that attracts more customers and builds our market share?
How sustainable are our product differentiators? How rapidly are new product features commoditized? What is the cycle of innovation and imitation in our industry? How rapidly do we have to reinvent our products to sustain differences customers will value?
Do we have any significant weaknesses in product differentiation—areas where our competitors’ products are differentiated from ours in ways customers value? If so, do our weaknesses constitute fatal flaws that will cost us business if not corrected?
Finally, what product differentiators are possible but haven’t been thought of yet? How can we evolve our products and services in ways that create more differentiated value? In Levitt’s terms, what is the potential product?
When marketing and product development teams meet to discuss the invention of new products or reinvention of existing ones, it’s clear that these kinds of questions weigh on their minds. It’s not clear, however, that they reflect on the behavioral corollaries of these questions:
What unique product features could we invent that would enable us to create or exploit BD? In other words, how could our unique value proposition integrate both product and behavioral differentiators?
How could we deliver our products or services in ways that behaviorally differentiate us?
Do we have any significant weaknesses in our behaviors toward customers at any touch point? If so, do those behaviors negatively differentiate us and cost us business?
And so on. We suspect that most companies don’t consciously reflect on their behaviors with customers except to consider traditional customer service practices. However, behavior is a rich source of potential differentiation, and it should be a key consideration as marketing and product development teams think about re-creating their value proposition.
Probably the ultimate form of BD through product design is mass customization (assuming your competitors don’t do it and you do). In their excellent book, The One to One Future, Don Peppers and Martha Rogers argue that “the mass-customization of a product, if it’s done right, represents an almost air-tight guarantee of a satisfied loyal, long-term customer. When you go to a bike shop to design your own mountain bike, you are collaborating with the manufacturer. You are also, in essence, ‘subscribing’ to a product, and the odds go up that the bike shop will get a greater share of your business.”⁶Peppers and Rogers contend that mass customization is inevitable. As customers experience the value of purchasing products that are tailor-made for them, they will come to expect it from all suppliers except those discounters who compete on low price. Why would a customer buy a prepackaged music CD, for instance, that has some songs she likes and others she doesn’t when she has the option to select only the songs she likes, arrange them in her preferred order, and have her own customized CD created in the store?
In the B2B world, mass customization has long been more the rule than the exception because companies and government entities that are buying products and services have the purchasing clout to specify precisely what they want, and suppliers have little choice but to bid to the spec. Nonetheless, even in the B2B world, there remain some businesses that create and sell standard products or uniform services, and they will likely find, in the years to come, that customers will demand customization or even lower prices. As Peppers and Rogers note, “Mass-customization is the ultimate form of customer differentiation. It is nothing more, essentially, than using individualized product design to capture the greatest possible share of every single individual customer’s business. It is what tomorrow’s business successes will be built on.”⁷ Because mass-customized products build customer loyalty, mass customization is one area of marketing that offers a significant first-mover advantage. If your competitors are not already finding ways to mass customize their products and services, you have a once-in-a-lifetime opportunity to move first and behaviorally differentiate yourself from them.