Why your business needs differentiation and how to do it – Pt 1

Too many B2B sales and marketing teams talk about differentiation without really knowing what it means. This article in 2 parts will set you straight

Why your business needs differentiation and how to do it – Pt 1

Why your business needs differentiation and how to do it – Pt 1 939 462 Visible Pathway

Author: Mark Cotgrove |  Reading time: 5-6 minutes

There is a lot of talk in the world of B2B sales about “differentiating” when it applies to your product, your service and your company, but do you know what that means in the context of your business?

It’s my experience that far too many sales and marketing teams talk about the need for differentiation. They talk about it without really knowing what that really means or how to go about it. This article sets out to explain why differentiation is crucial to B2B sales success. It then explains how to apply it to your business.

Your business needs to differentiate

© Sutirta Budiman

It’s the job that matters

The first thing we need to do is debunk the notion that your customer is the most important actor in your ‘go to market’ strategy. Actually it is the job that this customer is trying to get done using your product that is the most important aspect for you to understand. Professor Clayton Christensen calls it the Job to be Done theory. I encourage you to read more about it here.

Everything and I do mean everything that your customer is going to buy is to help them perform a particular job more efficiently. Your ‘job’ then is to understand their job better than your competitors do, even better possibly than your customers.

The more you can understand their job, the easier it will be to serve that customers need. Let’s call this the Value spot.

We will come back to this concept later in the article.

The more you can understand their job, the easier it will be to serve that customers need. Let’s call this the Value spot.

Why differentiate

Differentiation permits you to get a premium for your product or service over your competition. When you differentiate at the customers Value spot you set yourself apart from the competition. Your customers see you as being able to best satisfy their need. Differentiation means more wins, more revenue, more margin, more fun! And less grumbling from sales people blaming everyone else for not winning a deal.

In today’s world your customers have researched your company,  your product, your competitors, maybe even your people, well before they engage with you directly. Being able to differentiate yourself successfully is the best way to protect margin on sales, avoid deep discounting and build success and dominance in a market.

Your business needs to differentiate

© Nick Fewings, Eewings, get it?

Benefits of differentiation

When you differentiate successfully you will see

  • improved ability to qualify opportunities by knowing where your sweet spot is
  • less friction in your sales cycles
  • less pressure on pricing
  • stronger cashflow
  • more successful implementations
  • improved customer satisfaction

In a business that regularly competes against a handful of known competitors the ability to differentiate successfully will stand you apart from the competition. This differentiation underpins sustainable, profitable growth.

Where to differentiate – the Value spot

Differentiation has to occur where your customers realise Value, at this Value spot.

So many vendor presentations I have seen over the past decade or more try to differentiate on things that are important to them, the vendor. This is a consequence of Product Marketing teams having too much influence over how to position a product in the market.

Sales teams are drilled (one could argue programmed) to ask a few questions (usually unrelated to the customers job) then launch into talking about features and benefits and how their product is better (because it’s different from the competition). They are let loose on the world believing they are differentiated. They may be, but often not where the customer actually cares.

Here is an example

I was invited to attend a software vendor presentation day for my client.  There were 4 vendors presenting. 3 vendors presentations I witnessed boasted as a key differentiator (amongst others) that they allowed users to use a mobile app to access the system (this was a few years ago so it was innovative). In our business requirements document given to vendors prior to the presentation we had indicated clearly that our sales team was inhouse and only ever worked in the call centre. There was no requirement for mobility. this meant we didn’t value it.

Only 1 vendor had picked up on this (meaning read and understood our requirements). The other 3 didn’t. The one that did mentioned they had it but did not focus on it. Instead they offered something ‘different’. In addition to the standard user training they would have a trainer in our office for the first week of the system going live. And they would support all our users as they worked shifts too. This meant a lot to us. By focussing in on what was of value to us, the customer’s job, they differentiated themselves instantly from the competition.

 

Your business needs to differentiate

© Arlington Research

Easy when you know how

The other 3 had all regurgitated the presentation as instructed and trained to do. And this was for a procurement of close to £1,000,000 over 3 years. How easy was it for one vendor to shine above the pack? Needless to say they won the business even though they were the most expensive. The real differentiator in this scenario was the sales team who had read the brief and adjusted their pitch to suit. Not rocket science, no business change required, in fact they were able to sell us more services as a result end increase the deal size.

Let me be categoric – Differentiation is worthless when

  • You are ‘different’ where the customer sees no value
  • You are ‘different’ where you think your product is better than the competition (often this can be the same place as point 1)

In the example 3 vendors were trying to differentiate in the same place. Probably the place where Product Marketing had told them to. When that happens this feature, function, whatever, is said to be commoditised. And when something becomes commoditised it means the thing that is offered by many vendors is sufficient to address the target market requirement so that all offers are perceived to do the job and therefore you compete on price only with virtually no other way to differentiate. Time to move on.

Only 1 vendor differentiated where it mattered to the customer, at their Value spot.

How to differentiate

Let’s revisit the customer Job to be Done theory as laid down by Clay Christensen.

The best way to understand this job is to really get out and talk to your implementation teams and more importantly listen to your existing customers about how they use your product. Chances are it is different to what you think they are using it for. Even better if you can actually watch them using it. Time spent doing this will pay off big time in the long run, I promise. And don’t leave it to a customer support team member to do, the CEO and senior executives need to hear it first hand, so get out there yourself, listen to your customers, your business depends on it!

I recommend watching this video for a fuller explanation on how to define the job to be done by your customers.

Creating a new market

Now of course if you are creating a new market then it’s really hard to do this because you have no customers yet. And nor does anyone else. In this case, you will need to rely on prospective customers or companies that fit your initial target profile (which might be wrong). Have them interact with a prototype or mock-up of your product to establish a starting point. In this case you need to limit your initial investment and the time taken in developing these prototypes. You need to stay agile and retain sufficient capital and resources to be able to invest properly when you do find the Value spot. More on understanding this aspect can be found by reading serial entrepreneur Steve Blank’s blog.

Once you have the job clearly defined and understood you can begin to explore how what you offer addresses that job better than any of your competitors. We will cover that in Part 2 of this article.