What is Competitive Differentiation?

Simply put, competitive differentiation is what sets your product apart from others in the same landscape. This typically includes the approach your business is taking to create and market a distinctive product that solves common problems for your customers. Providing a quality solution with unique benefits is key to becoming a major player in the industry.

This type of strategy helps your company build a brand that attracts loyal customers through quality products and services. Rather than simply being the marketing behind your brand, competitive differentiation includes many factors. Your business should focus on things like innovative solutions, pricing strategies, exceptional customer service, and informative content.

Competitive differentiation requires an understanding of the market, as well as the needs of your target clients. Six different types of differentiation can help your company remain competitive including product, service, channel, relationship, brand, and price. Breaking these down can help your team identify areas where your company can improve.

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Product Differentiation

These are the physical features that your customers are buying. Your product is measured on a variety of factors like performance, efficacy, and reliability. These characteristics play a large role in the buying decisions of your customers, as they want a product with the best features to solve their problems.

Service Differentiation

Also known as the customer experience, service is how prospects and customers interact with your company. Setting yourself apart from other companies by having stellar customer support is a great way to become a major player in the industry. Your team should find ways to have a great and unique customer experience, including factors like customer success, ease of ordering, installation, and onboarding.

Channel Differentiation

This refers to how your product is distributed. Your customers’ journey is impacted by the channels they are using to purchase your product. Having a trustworthy distributor can be a great way to gain a trusted ally or partner in the industry.

Relationship Differentiation

Your employees play a key role in the success of your company. The relationships they cultivate are incredibly important to building a strong sales funnel and loyal customer base. This is more than just your sales department, and each link between employees and customers should be strong.

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Brand Differentiation

A good marketing strategy is important for your team. Marketing is usually one of the first ways a potential client interacts with your company, and the brand image they see is crucial. Having a solid marketing strategy that aligns with the goals of your sales team will help generate high quality sales leads and fill the sales funnel.

Price Differentiation

Understanding where your product falls in terms of industry pricing will help lead your team to success. It’s important to be in line with market value, as well as increase pricing for premium features. 

Your team doesn’t want to undersell or oversell your product’s capabilities. Having a price point that matches the solution your company offers is important for standing out amongst your competitors.

How Are Branding and Competitive Differentiation Linked?

As our business landscape continues to dive further into the digital realm, branding and competitive differentiation go hand-in-hand to help your company stand out. A lot of marketing takes place on social media and websites, which is a sea of businesses competing for the attention of the consumer. Other than just your social media campaigns, branding plays a role in marketing aspects like Google ads and search engine optimization (SEO) searches.

Most people begin their search for a tech solution by performing a Google search rather than seeking out a sales rep. This means that the first impression of your company typically happens online without your team knowing until afterward. Without a strong brand persona that establishes your product as a credible and competitive solution, your company has very little chance to make an impact on the consumer.

Just as your product should stand out from the crowd, so should your marketing strategy. Your marketing plan should focus on highlighting the unique ways your product is different from that of your competitors while creating a brand that builds trust with consumers. Many leads will appreciate your product if your company is seen as an authoritative source of knowledge for the industry.

A great way to link branding and product differentiation is through your content strategy. Using data to gain a deep understanding of your target audience can help your marketing department create campaigns that encourage customer engagement. Data can help your team decide which pain points your product helps solve, and your marketing strategy can establish your company as a voice that offers a solution. 

Branding also needs a unique flair to attract interest from leads. By leaning into the specific angle your product takes within the market, your team can create content to highlight these features. Establishing a strong voice that showcases your product as well as your company’s mission is a great step for developing a consistent and compelling brand.

The Importance of Measuring Competitive Differentiation

Understanding the data behind what sets your product apart helps your company gain insights that can further develop your services. Establishing yourself as a market leader generates more quality leads, improves customer retention, and increases return on investment (ROI). Your company needs to know if you are providing unique value to the industry, and measuring data can help.

Attracting new customers and retaining existing relationships is almost always the top priority for businesses. Without customers in the sales funnel, your company cannot produce revenue. Remaining competitive in the B2B industry takes more than just a full sales funnel.

Your company needs insight into how your product attracts customers. This information helps determine what drives your business’ success, as well as what areas need improvement. Using this data will help your departments focus on creating a product that customers will want to buy.

Rather than guessing at ways to make your product and services stand out, a data-driven strategy can help your team outline a plan for success. Basing new features and premium offerings on what matters most to your target customers is an easy recipe for boosting ROI. It also helps build trust in your client relationships, as current buyers can pick more services that provide solutions to their problems.

How to Use the Differentiation Index

To get started, your team needs to know what can be used to measure competitive differentiation. The Differentiation Index (TDI) is a straightforward method that provides results for companies to use in product development and other areas of improvement. Using the method below can help your team get started:

1. Start by picking a key stakeholder in a given market and listing the top five characteristics sought in solutions. This information should be relevant to target audiences, and it doesn’t have to be featured within your current product. If your team doesn’t already have this data available, take time to research this information by collecting customer feedback or gathering insight from your customer success team.

2. Next, you’ll want to rate the overall perception of your company by customers based on your ability to deliver these characteristics. You should also rate your competitors on the same criteria. Use real data from customer feedback like satisfaction surveys, onboarding questionnaires, and conversations with your sales team if possible.

3. Finally, multiply the rating by the benefit weight to create a score. This information helps visualize where you stand in the market versus direct competitors. With it, your business can begin to develop a strategy for improvement based on the needs of your customers and target audience. 

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While this method is more of a hypothesis than fact, it acts as a framework to help outline your product's advantages and disadvantages. It can also help your team dig into the needs of your customers to better understand their motivations. It may even provide a reality check for companies who think their product is the best, yet their market share doesn’t reflect this.

Setting Your B2B Company Apart in a Crowded Field

One of the biggest challenges B2B companies face is being one of many in a crowded field. For customers seeking solutions, their initial searches may seem full of companies offering similar products at similar price points. To stand out against this, companies must find an angle that highlights their unique brand and product offerings.

Competitive differentiation encompasses more than product features; it includes the buyer journey, customer experience, and branding. Having a compelling brand starts with creating a narrative that leaves leads wanting your product. It’s important to find ways to use messaging that creates desire. 

An easy way to achieve this through your marketing is by finding new points to discuss about your product and the solution it offers. A lot of companies fall into the routine of discussing the same talking points as their competitors to highlight a product, but that can be boring for consumers. Instead, use market trends and data to find new approaches that will resonate with prospects.

Avoiding familiar language and phrasing helps your brand stand apart from others. Authenticity is another way to help bridge the gap between customers and your company. Even when selling a B2B solution, it’s important to understand that humans are the ones making the buying decisions.

Just like B2C sales, emotion plays a role in the B2B industry as well. Rather than relying completely on hard data and rationale, your brand can benefit from the addition of emotion. This doesn’t mean that customers are not going to evaluate all of the common features before making a purchase, but it does help your brand stand out in the initial search. 

Your company should invest time and resources into a brand strategy that highlights what sets you apart from competitors. This plan should use emotion and rationale to create a compelling narrative, which will help leads understand the meaningful benefits your business provides. Using customer motivations from your current clients, as well as your target audience, can help back up this strategy with data. 

Next, don’t be afraid to incorporate the emotional brand benefits your company offers. Rather than just showing off your newest features or product launch, your marketing department should be focusing on how these aspects improve the lives of buyers. This could be as simple as eliminating confusing corporate jargon and sharing customer testimonials.

Finally, emphasize the customer experience and showcase what your team does to provide exceptional customer service. This will be important in cultivating brand loyalty and improving customer retention. For example, empathize with clients and share how your product can alleviate common frustrations.

Use data to determine what your current clients enjoy about your customer experience and incorporate this into your brand messaging. This is also a great opportunity to gather feedback and improve the overall buyer journey. 

Another way to help set your brand apart is incorporating demand generation into your overall strategy. This focuses on creating customer excitement about your product without explicitly trying to land a sale. Demand generation can build customer hype, promote new features across your channels, and strengthen current customers.

Not to be confused with lead generation, this strategy is a long-term plan that measures engagement rather than volume of leads. It can help your team establish best practices that lead to quality prospects rather than filling the funnel with junk leads. This strategy can also help align the marketing and sales departments to ensure everyone is working toward a common goal.

It can also help establish your brand as a market leader through educational content across your channels. This includes email marketing, webinars, and sponsored product launches. By creating this type of content, your company is encouraging prospects and current customers to look to your business as a leading source of industry knowledge.

Focusing on an Exceptional Customer Experience

Using the customer experience as a competitive differentiator is another way to establish your company as a market leader. In an oversaturated market, capturing and retaining customer attention is crucial for success. Having a good product is just a small piece of the overall puzzle, and customer experience plays a huge role in building and maintaining your brand’s reputation. 

To start, it’s important to understand what defines the customer experience. This is more than interactions with your customer service department. The experience starts from the very first touchpoint with your brand and continues through every interaction with a lead. 

Customer experience also follows the journey after a purchase has been completed, which includes onboarding and ongoing product usage. This journey helps your team understand how a customer feels throughout each stage in the process, as well as helps analyze their relationship with your brand. 

Positive customer interactions lead to overall satisfaction, higher client retention, and more brand loyalty. Salesforce found that positive customer service experiences lead to 94% of consumers being more likely to make repeat purchases. 

Salesforce also found that 82% of customers who have had excellent customer service experiences ended up recommending the company to others. Word-of-mouth buzz about your business and the service it provides is a great way to create organic brand awareness. By adding authenticity to your messaging, referrals and recommendations include the much-needed emotion to marketing that can help set your content apart.

On the flipside, about 61% of customers will switch to a new brand after a single poor experience. This means the stakes are high when it comes to providing a quality customer journey. It also means that if your team can provide a great customer experience, you may win business from competitors who fail in the service department. 

What is Product Differentiation?

While your brand and customer experience are important aspects, your product is the center of all purchases. This type of differentiation helps increase sales and build brand loyalty, as well as provide valuable solutions to your clients. Having a product differentiation strategy allows your team to identify unique features of your company and its offerings while highlighting key differences between you and your competitors. 

It also makes your product attractive to your target audience, generating quality leads. Your product’s differentiation should be based on industry data to provide key benefits for customers. It’s important to understand that these features should make your services the better choice compared to other brands. 

Three main types of product differentiation can help your team get started with a strategy.

1. Price

Typically, there are two ways to approach price differentiation. Based on the market and your product, your team can either try to offer the lowest price or they can imply quality through higher pricing. Low price attracts budget-conscious buyers, whereas high pricing can make your product seem like a luxury. 

2. Performance

All customers want to buy a product that works. It’s common for leads to seek out products with a strong reputation for quality. This aspect goes hand-in-hand with your customer service, as many clients want a company that has resources available for troubleshooting when needed.

3. Location

If you’ve heard the phrase “shop local”, then you’ve experienced a brand trying to differentiate its product by location. Many companies will emphasize their small nature and turn it into a positive by highlighting their local roots.

Along with these types of strategies, there are two main forms of product differentiation to consider.

Vertical Differentiation

Ranking products based on a tangible factor, like price or performance, and choosing the highest rated. Not all customers will measure based on the same factors since their priorities will differ. Some may look for the lowest cost, while others may value quicker customer service. 

Horizontal Differentiation

Based more on emotion than its counterpart, horizontal differentiation is when a customer chooses a product based solely on personal preference. When products in the market are at a similar price point with the same features, a decision can be based solely on emotion and preference rather than measurable differences.

Exploring product differentiation is a great way to develop new features based on customer data. By assessing what your target audience and current customers value, such as price or quality, your team can determine which direction to take with new product development.

Key Takeaways

In the current market and economy, B2B success hinges on setting your company apart from the status quo. By understanding and utilizing competitive differentiation, your team can focus on creating a product that provides a unique solution for your customers. Differentiation will also help your business establish itself as a leader in the industry and promote strong brand loyalty among its customers.

Many factors work together to create a successful differentiation strategy, including customer experience, product, and branding. Utilizing data and industry knowledge is a great starting point for companies that are ready to scale. Incorporating these strategies will help your team stand out from the crowd of B2B companies. 

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