On Differentiation

Differentiation is critical in helping customers select our solution over the alternatives.

As important as it is, most sales people do a terrible job at differentiation.  Ultimately, too many are unable to differentiate in meaningful ways, as a result they end up differentiating on price.

Every time we win by taking pricing actions, we are telegraphing and reinforcing, “There is really no reason to buy our products/services other than we are the cheapest alternative available.”

Over time, these actions train both our customers and sales people that we are no better and no worse than any other alternative–and that we are not different.

Most often, our attempts to differentiate focus on the wrong things.

We develop endless feature/function checklists.  You know what those look like, they are a bunch of features and functions we (usually it’s marketing and product management) think are important.  We compare those to the alternatives and we generate a matrix that shows we have far more boxes checked that the others.  Of course our competitors do the same thing, always somehow finding a different sent of criteria, showing they check off far more boxes than their competition (which includes us)

This differentiation is usually meaningless–every once in a while we or a competitor has a certain feature/function checked that’s really important–for example, “we have more colors to choose from  (which is really interesting in SaaS products).”  But that’s seldom sustainable, soon all the competitors are offering the same “hot function,” pretty soon the customers have a rainbow of colors to choose from.

We differentiate based on our company, our customers, and our capabilities.  We present endless corporate ego charts to the customer, showing our locations, all the customer logos, and so forth.  Ironically, our competitors present the same charts—it turns out too often, the same companies are everyone’s biggest customers.  So those end up being useless as differentiators.

We used to differentiate ourselves on quality, sometimes try to on service—but those end up not being sustainable or different.  In reality, any solution the customer has on their “short list.” will solve their problems.  As a result, we are not different or at least not different enough.

And this is where most sales and marketing programs around differentiation stop.  Which is why so many deals are won by price.

The first problem with these methods of differentiation is they are all based on what we think is important and “a differentiator,”  and of course we are biased, often to the point of blindness.

None of these things is meaningful unless it is important to the customer.  But because we are endlessly pitching the customer, we seldom take the time to ask, “What’s important to you?  Why is that important?  What are the consequences if you can’t/don’t do this….?”

What is important to us is meaningless, all that counts is what is important to the customer, yet we don’t take the time to probe and understand what, why, how.

Then usually, the customer expresses these requirements in ways that are different than we express them.  “I need to improve productivity, I need to accelerate growth, I need to accelerate time to profitability, I need to cut costs, I need to address new markets……”

We are constantly listening for, “I want a rainbow of colors…..”  When we hear that, we stop our discovery, questioning, probing process, responding, “We have more colors than anyone else, in fact we can customize the color of each product you buy…..”

Our efforts in understanding what customers want stop when we are triggered by something we think is a differentiator and we go into pitch mode.

Often, our customers don’t know what they should be looking for or what may be possible.  But if we don’t understand our customers businesses, their customers, competitors, and markets, we can’t make suggestions that could be important to them.

But if, somehow we get to the point of understanding what’s important to the customer, once they have prioritized them, we can start presenting our capabilities in that context.  So if they don’t mention a “rainbow of colors,” it’s useless in our differentiation and we shouldn’t waste the customer’s or our time in talking about it.

But the big miss in differentiation is us–how we engage the customer in their buying process.

How are we helping them think about the problem/opportunity differently?  How are we helping them understand all the issues that impact their success?  How are we engaging them to discover what’s important, identify the risk, establish goals, set expectations?  How are we helping them learn how to buy, align the divergent interests in the buying group, build the business case to get management approval.

How we engage the customer in helping them solve their problems, in helping them achieve their goals, in helping them make a buying decision becomes the ultimate differentiator.

It also becomes the method by which we create value with the customer–moving from priced based differentiation to value based differentiation.

But what’s really important about this is that we know our competitors are trying to differentiate themselves on what they sell and who their companies are—not by how they engage and create value with the customer.

Ultimately, that becomes the differentiator.