Chris Castiglione Co-founder of Adjunct Prof at Columbia University Business School.

Creating A Strong Product Differentiation Strategy

3 min read

Imagine a customer is leaving a restaurant and choosing between calling an Uber or a Lyft. He knows he wants to get home as quickly as possible, but he’s still faced with a decision. Should he call an Uber or opt for a Lyft instead?

The executives at Uber and Lyft work hard to differentiate their products so that the customer’s choice is easy. They want customers to make a choice without thinking at all.

As you grow your business, you want to make sure you’re differentiating from the pack so that users choose you over competitors again and again. In fact, you want to create a product that’s so good that your customers don’t see your competitors as viable options.

In this post, we’ll explore how you can craft a strong product differentiation strategy that sets you apart from the competition.

What is Product Differentiation?

Product differentiation, by definition, is what separates you from your competitors. What is it about your product that makes it unique? What stands out? Why would a prospective customer choose you over a competitor?

But product differentiation refers to more than just being different. It’s about offering something that has an attractive advantage. Coming up with a differentiation strategy is essential to the products and services you sell, but it’s also important for your branding and marketing efforts. How is your marketing different from what’s out there?

The Challenges

If it were easy, you wouldn’t be reading this post. Here are some common challenges that entrepreneurs face as they strive to create a successful strategy:

Copying others. When you see your competition offering brand new features, it’s tempting to copy exactly what they’re doing. You worry that customers will see those new features and ditch you for your competitor. But if all you do is copy, you don’t have a distinct product differentiation strategy. You need to be committed to creating a better overall experience, instead of racing to copy the competition.

Sustaining the competitive advantage. When you first start out, you may have a few distinct advantages, but it won’t be long for the competition to catch up, and for your audience to get bored. As you grow, you need to continually stay on top of trends, constantly iterating to find new ways to differentiate.

Race to the bottom tactics. It can be tempting to compete on price, but this strategy could put you out of business. If you only differentiate on price, offering the lowest possible offers, then youre setting yourself up for a constant race to the bottom.

Relying purely on product quality. Your product may be made of the finest materials, and your software may have been developed by top engineers, but customers are interested in more than quality alone. Plus, many businessses claim to offer quality services but have low standards.

Start with You, Not Your Competitors

Robert Herjavek, serial entrepreneur, thinks the world is filled with too many “me too” businesses, which makes it difficult for them to get capital. “I think if you really have an innovative idea and you’re first to market, there’s no shortage in money,” Herjavek told Entrepreneur.

Saying “me too” goes beyond product. Sometimes, businesses mimic their competition’s marketing, rather than differentiating with a unique strategy. You might see that your competition has published a new blog series, or is offering a series of coupon codes in creative channels. Sometimes, their tactics might inspire you, but it’s important to develop your own strategy.

Prioritize the User

When you’re trying to differentiate, it’s important that you think about how you can improve the experience for the user. Many founders get hung up on what the competition is doing, or work so hard to do something different, that they forget about the people they’re serving.

When crafting a differentiation strategy, think first about your user. Is there something you could offer that would make their lives better? Ask yourself:

  • How is our offering an advantage for the customer?
  • What problems does our product solve?
  • What do users need that we could provide?

Race to the Top

As we outlined earlier, it can be tempting to offer the lowest possible prices. You reason that low prices are a good way to differentiate your product from your competitor’s.

In some cases, price can be a good differentiator. For example, if you’ve found a revolutionary way to manufacture products, and are able to reduce your margins substantially, it may make sense to come in at a much lower price point. In this scenario, you’re not losing money by offering low prices. Instead, you’re creating value for the consumer.

Most of the time, however, you want to race to the top. That means creating premium products and offerings. Think about how good it feels to buy a well made pair of jeans or the perfect project management software, in both these cases, customers are willing to pay a high price to get what they want. If you’re able to differentiate, price points won’t be a problem.

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Chris Castiglione Co-founder of Adjunct Prof at Columbia University Business School.