How to differentiate in a commoditized market
- By Elizabeth Harr
- May 22, 2018
Differentiation – meaningful, relevant differentiation – is one of the great marketing challenges for professional services firms. And with the advent of automation technology and AI, it’s not only easier for new service providers to enter and crowd the market, the provision of those services is easier, faster, and in some cases, requires little specialization.
In this article, I’ll discuss how differentiation works in a commoditized market, and how to get started on a differentiation strategy today. There’s no one-size-fits-all solution — but I can show you how to locate the insights that you need to develop a powerful set of differentiators, and advise on a few of the finer points of the game.
What Is Competitive Differentiation, and Why Does It Matter?
Competitive differentiation is a process that gives buyers a compelling reason to select your firm. It focuses on the one (or more) firm characteristics that key competitors either lack or don’t discuss — but that your customers care about.
In the selection process, buyers face an array of service providers, most of whom appear to offer roughly the same services. They all say more or less the same things about their proprietary processes, great people, and commitment to quality service. They often even look alike, from their logos to their colors to their clichéd stock photos.
It is a small wonder that the firms with either the best name recognition or the lowest cost are going to be selected. After all, what else do buyers have to go on?
The answer is differentiation. In a commoditized market, differentiation helps firms stand out in a way that is relevant to the concerns and priorities of their audience, and in a way that proves what matters most, particularly in a crowded industry – expertise.
A Playbook for Competitive Differentiation
Step 1: Target Your Key Audiences
There are many ways to identify your audiences. At its most basic, your list might look like this:
- Existing clients
- Prospective clients
- Prospective partners
- Prospective employees
If you have a very diverse client base, you might want to further subdivide your audience, such as by industry or even role (CEO, CISO, etc.).
Step 2: Make an Initial List of Differentiators
Develop a list of characteristics that you believe sets your firm apart. Don’t try to address all the things your firm does; rather, try to highlight just those features that make it different. If you’ve done some research, carefully go over the findings. Look for any ways that you are different. Keep each differentiator a single, simple idea, without jargon.
Step 3: Start Vetting Your List
Hopefully, you now have a lengthy list of differentiator “candidates.” It’s time to vet them — a ruthless process that few of them will survive. That’s a good thing, because it’s quality that counts — and even one great differentiator can have an enormous impact. Run each candidate through these three tests:
- Is it true (or you are working to make it so)?
- Is it relevant to your target audience?
- Can you support it with evidence?
Next, ask three more “reality check” questions of any candidates that are left standing:
- Can any key competitor claim the same thing? Be honest — because if the answer is yes, you won’t really be setting your firm apart.
- Is it truly different? When composing differentiators, it’s all too easy to write something that sounds really great — but that merely describes your firm, without setting you apart.
- Can you support it with a substantial amount of evidence? If not, give it the boot.
How many differentiators should you end up with? Most Hinge clients end up with 3-6 — but some come out of the process with just one or two. But no matter how many differentiators you have, usually only one or two are true, defining differentiators — those unique qualities that people will associate with your firm.
Step 4: Rank Your Differentiators
List your differentiators in order of importance, starting with the differentiator you most want people to associate with your firm. As you do, keep these two criteria in mind:
- How important is it to your top audience – the decision makers?
- How strong is the supporting evidence?
Today’s government buyers are faced with the unenviable chore of selecting the best firm from a vast, sea of nearly identical options. Differentiation makes their job easier.
Of course, it helps firms like yours, too. If you’ve struggled to find interesting or original ways to describe your firm, differentiators give you the elements of a better story. They are also your first step toward positioning your brand in the marketplace and helping your target audience develop a true preference for your services.
And while not every firm has a feature that is totally unique, in a commoditized market, it’s crucial to at least identify an aspect of your business about which you can build a compelling story — one that nobody else is telling.
Elizabeth Harr is a partner with Hinge Marketing and leads the firm’s technology and consulting practice. She is the co-author of two books, the Visible Expert and the Buyer’s Brain.