Successful companies are distinguished by strategic differentiation. If your company’s products are not differentiated in ways that really matter to your customers, your products may not necessarily die — but they certainly will be commoditised over time and at best will end up as also-ran products.A competitive advantage is what gives your firm an edge over competitors. Entrepreneurs whose product and service offerings are just ordinary will be overtaken by competitors. You need to offer customers greater value, either by means of lower prices or by offering greater value and benefits that justify charging higher prices.
Differentiation involves selecting one or more criteria used by buyers in a market and then positioning your business uniquely to meet those criteria. With this strategy you can charge higher prices to reflect the higher inputs you put in producing your product as well as the extra value that the customer gets. For this strategy to work, the extra value must be clearly communicated to the customer, so that he or she can distinguish your product from “ordinary ones”.
However, most unique values will soon get lost as competitors copy them, or even improve upon them. Toyota Motor Corporation was the first to differentiate using lean manufacturing processes, which includes continuous process improvement, flexible production and waste minimisation. However, most major motor companies soon copied the lean manufacturing process and Toyota had competition. Toyota stayed ahead of the pack because of it’s dedication to continuous process improvement, which meant imitators where always a step behind.
HOW CAN YOU DEFFERENTIATE YOUR BUSINESS?Most highly valued attributes become commodity features over time. To combat that loss of advantage or uniqueness, your business needs to be continually developing new value and benefits in existing products or services and developing new products and services to remain in a market leader position.
As a small business, you do not have infinite resources. One way of differentiating is through brainstorming new products, new features, and new benefits (and testing the outcome before implementation). Another way of differentiating your business is through a customer-focused approach. If you have been in the market place for a while, ask your customers what they want and need from your products and what product differentiation variables they value:
What are the basic needs — price, on-time delivery, etc.?What are the expected needs — level of quality, level of service? What are the desired needs? These would be nice to have, but not necessarily deal breakers (for example, if service is important to your customer, they may feel that having a live person on the phone would be a desired need, rather than a voice mail system). What would your customer really be amazed and delighted to receive? For example, a follow-up call within 24 hours of each delivery to ensure customer satisfaction?
Once you have answers for these questions, you can decide on your unique value approach to your customers. You must listen to what customers say, then give customers what they want, and sometimes give them what they don’t know they want.
To compete effectively, you need to build a strong product differentiation plan. It is important that you clearly understand how your product can be differentiated (this can be on one or more variables) and it is important that this product differentiation is one that is desired by your customer. There is little benefit in having a highly differentiated product that no one wants to buy.
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The next SME Business Link networking event will be in Harare on the evening of June 23. A leading entrepreneur has been invited to be the guest speaker and entrepreneurs will have the opportunity to network and share ideas and business opportunities. I also wish to invite you as entrepreneurs to share advice or ask questions on business at the LinkedIn page, join at http://www.linkin.com and search for the group SME BusinessLink — To your business growth.
