96 The Power of Differentiation

I wrote a couple of weeks ago about the risks we face in business with a weakening economy.

Some of the replies I got back said that was okay, but what can we do to make sure that we are still in business at the end of the year? How do we compete in a shrinking market?

The first rule here is differentiation. We have to make sure we can differentiate ourselves from our competitors so that the customers can see us as different. In a growing market when there is enough business to go round there is less pressure to differentiate. In a shrinking market we must be seen to be different or die.

If the customer can see no difference between you and your competitors they will choose the cheapest price.

Let’s imagine I have two identical products (or services) in front of me. They come off the same production line in Taiwan so they are identical, in fact the only difference between the two products is that one is priced at R300 and the other is priced at R400. Which one would you buy?

Of course you would buy the cheaper product, and probably be very pleased with your self for doing so. The customer will always buy the cheaper product if they can see no difference between one brand and another.

In this environment where all products are identical there is a temptation to enter into a price war. As manufacturers, we see our customers always buying the cheapest so we begin to believe the customer only cares about price. How often have you heard that in your sales meetings?

Now, let us imagine that the product priced at R400 also comes with a lifetime guarantee, delivery over the next 24 hours, parts readily available and a very attractive sales person to sell it to you. Which one would you buy now?

The R400 one of course… but why? Because it is better value. You have differentiated yourself from your competitors with added items that the customer values and, therefore, made your product more attractive.

Don’t be tempted into a price war with your competitors in this shrinking market. Rather talk to as many customers as possible to see what they consider would add value to your product or service.

There are many items that this might be:

Improved delivery, smarter delivery vehicles, attractive sales people (and by that I mean sales people with attractive personalities), longer guarantee, uncondititional guarantee, bigger range of colours, better response to customer complaints, more flexible working hours, bigger range of products, shorter service contract, longer service contracts, additional benefits, stronger materials, longer lasting, self-lubricating, 24 hour delivery, open all hours, the list is endless.

What are you going to do to differentiate yourself from your competitors this year?

This article is written and published by Richard Mulvey who can be contacted on www.richardmulvey.com. You may re-publish this article in any media as long as it is not altered in any way and it contains this final paragraph