What Is Competitive
Differentiation?
Most vendors define this as “capabilities that we have or do
better than our competition”. Pretty
straightforward, right? But do customers
share this definition? Likely not.
Customers are looking for solutions that fit their
perception of their current and expected future needs. A vendor with capabilities the meets these
current and future needs exactly is clearly the best choice, everything else
being equal (such as price).
With that in mind, a vendor who seeks to “differentiate” by
simply presenting capabilities that another vendor lacks is at risk. What if the customer doesn’t see the need for
these additional capabilities? What if
they don’t care or, worse, can’t use them?
Then these additional capabilities become a liability.
For example, let’s say you are shopping for a new set of
kitchen knives. At the store, you are
looking at several knife sets and the sales person steers you to one particular
set of 10 knives, saying, “This set is better because it has 10 knives – one
more than most – plus a sharpener, so you can keep all of your knives
razor-sharp.” The other sets on display only
have nine knives.
Sounds like a win, right?
However, it turns out that your knife block only has room for 9 knives
and no place for a sharpener. You are
concerned that the extra knife and sharpener will end up rattling around in a
drawer – and possibly be a hazard.
Differentiation has occurred, but not positive differentiation! The larger knife set is perceived as “too
much” and possibly “too expensive” (if it costs more than the set of 9) or
“cheap” if the price is the same as the set of 9, since the perception will
likely be that each knife individually is worth less.
The world of software is similar. Let’s say you are looking for a tool that
helps you to address availability problems with your website. You’ve decided you want something that sends
you an email message with an appropriate link when a problem is imminent, so
that you can click the link that logs you into the system, find the root cause,
and address the problem.
-
Vendor 1 does an excellent job doing Discovery
with you – and then presents a demo that specifically shows email alerts and
the ability to drill down and find root causes.
-
Vendor 2 does a good job doing Discovery with
you – and then presents a demo that shows email alerts and ability to drill
down and find root causes, and also
shows you a system dashboard while describing why dashboards are so wonderful.
Who will get the order?
Shouldn’t Vendor 2 get your business?
After all, they have what you need plus
a fabulous dashboard.
You give the order to Vendor 1, however. Why?
In doing Discovery with you, Vendor 1 learned that you hate to have to
open a pile of applications and review dashboards. You explained that you’d much rather only
have to pay attention when a problem is pending – and email alerts are your
preferred mode of receiving this information.
Vendor 1’s demo was right on target.
[Interestingly, Vendor 1 also
had dashboard capabilities, but elected not
to show them, since you had communicated your strong dislike of
dashboards. Turns out that both vendor
offerings were essentially equal in capabilities, but Vendor 2 showed a
capability you didn’t want or couldn’t use:
Negative differentiation.
Note also that Vendor 1 asked a few additional questions in
Discovery – with respect to how you want to consume
the alert information – and uncovered your dislike of dashboards: Vendor 1 achieved some additional positive
differentiation through the more complete Discovery work.
In spite of the above rather sad scenarios (for the knife
sales person and Vendor 2), most vendors view differentiation in terms of the
features and functions of their offerings.
“Ours has this, and theirs doesn’t” or “Ours does this better than
theirs does”.
Positive feature- or capability-based differentiation only takes place when the customer agrees that the capability is beneficial
in their specific situation – when the customer visualizes using the capability
sufficiently often and/or the problem the capability addresses is sufficiently
important to solve. Otherwise, the extra
features and capabilities are perceived as making the offering too complicated
or too expensive: “We don’t need the Cadillac;
we just want the economy car version…”
When to Differentiate? All the Time…!
From the customers’ perspective vendors are
“differentiating”, positively or negatively, with every contact, every meeting,
and every deliverable. Let’s explore
possible negative differentiation
first. How do you feel about:
-
Vendors that cold call you – repeatedly?
-
Vendors that take forever to answer your email
inquiries – or ignore what you asked?
-
Vendors that leap right to showing you a
“solution”, without sufficient Discovery?
-
Vendors whose demos look complicated or
confusing, in spite of having a pile of “competitive differentiators”?
-
Sales people that speak ill of their
competition?
-
Sales people that are “cagey” about providing
pricing information?
-
Vendors that over-promise and under-deliver?
Interestingly – and sadly – the list above is what often occurs with typical, traditional
vendors and sales people. Most of us as
customers perceive these items as unpleasant and they contribute to an overall
negative impression. Unwittingly,
perhaps, these vendors and sales people have differentiated negatively.
Let’s look at the same list again, but with a different
approach to each item:
-
Nurture or “trickle” marketing activities (as
opposed to cold calling). [For extra
credit, contemplate the intent of this article…!]
-
Rapid, specific responses to email inquiries.
-
Thorough and intelligent Discovery – before presenting solutions.
-
Crisp, focused, engaging demos of the Specific
Capabilities needed by customers.
-
Sales teams that are clear and honest about
their own offerings’ strengths and limitations.
-
Clear and transparent pricing information.
-
Building a vision of how the customer will move
from their current (painful) state to their desired (glorious) future state
with the solution in place and operating.
Generally speaking, these activities are viewed favorably by
customers. Vendors that follow these
processes are already differentiating
positively in comparison with “traditional” vendors.
In addition to the observations above, there are (at least)
three major opportunities to differentiate, positively, in sales interactions
with customers:
1.
During Discovery
2.
During demo delivery
3.
During discussion of implementation and beyond
Let’s examine each…
How to Differentiate
During Discovery:
This is one of the most effective ways to out-flank your
competition. Do Discovery with a bias towards potentially differentiating
capabilities you offer (and your competition lacks or doesn’t do as well), such
that those capabilities become part of the customer’s vision of a
solution.
The use of “Biased Questions” is a terrific and highly
successful technique of introducing capabilities that you believe should be
important to your customer, but the customer has not yet requested those
capabilities. They may (often) be
unaware that such capabilities exist.
Here’s a quick example:
Let’s say that your offering provides alerts in the form of email messages
when certain thresholds are reached (as many offerings do) – but in your case,
you can also set alerts based on approaching
a certain threshold.
During Discovery, you might say, “Some of the other
organizations we’ve worked with that had situations very similar to what you’ve outlined so far, found that the ability
to set alerts based on approaching certain
thresholds enabled them to take action before
problems grew large – and they were able to save hundreds of thousands of
dollars as a result. Is this something
you might also find useful in your
practice?”
Your customer responds, “Why yes, that sounds really great –
and I can see how we could use that.
Wish we’d had it before!”
This capability has now become a Specific Capability desired
by your customer – and you can prepare and plan to demonstrate it accordingly. Since your competition can’t offer the
capability, but only the simple alerts, you have successfully positively
differentiated.
Let’s explore this a bit further. The “Biased Question” method has three
elements that make it a successful and compelling approach:
- The Similarity:
Your first step is to establish a relationship between your current
prospect and other organizations – particularly those that are perceived by the
prospect as being similar to them.
- The Capability:
You describe the capability itself and its advantages and potential
benefits.
- The Reward:
You describe what rewards other, similar organizations have realized
through the use of the capability.
Finally, you test to see if this capability also sounds
interesting or particularly useful to the customer. If it does, you have successfully and
positively differentiated. Look for as
many opportunities to differentiate during Discovery as possible so that you
set yourself up as the dominant or preferred vendor – the only vendor that can
provide the capabilities now desired by the customer.
During the Demo:
Most vendors try to differentiate during demos – and very
often end up “buying it back”. This is
an intriguing problem inherent in software sales. From the perspective of most vendors,
offerings with more capabilities should be better for the customer, right?
Nope! Have you ever
heard customers say, during price discussions, “Well, you showed us a bunch of
stuff we’ll never use, so either take those capabilities out or reduce the
price.” The customers’ perspective is
that they are buying much more product than they need (“Cadillac vs. economy
car”), so they demand a price discount as compensation. This is known as “buying it back” – a very
sad situation for the vendor!
A more elegant and wise approach to differentiate during a
demo is to use Biased Questions when you believe you may have uncovered an
unmet need or other opportunity. The
process is the same as using Biased Questions during Discovery, but in this
case you can also offer to demonstrate the capability (if the customer would
like to see it).
During Discussion of Implementation – and Beyond:
Traditional sales people (and sales teams) are done with
their sales cycles when the purchase order arrives, leaving implementation to
their professional services team, partner organization, or the customer. Stronger sales people and sales teams develop
a vision with the customer of the
steps and process of moving the customer from their current problem state to
completed implementation – the “go live” date.
(Some sales methodologies call this process developing the “Transition
Vision”).
The truly terrific sales people and sales teams carry this
further out into the future – to the point where the customer has his/her first
small win, small victory, or initial ROI.
This is also the point in time when the customer can become a real
reference. What a wonderful way to positively
differentiate!
Beyond the Software
But wait, there’s more…
In earlier articles and blog posts I recommend (rather strongly) against
inflicting corporate overview presentations on your customers. Interestingly, some elements from typical corporate overview presentations can be
harvested and used to differentiate very nicely – but not in the form of the dreaded
traditional corporate overview.
Once a customer has seen that your offering can provide a
solution to their problem, they begin to be interested in learning more about
your organization. After all, they are
not just buying your code, but they are also buying a relationship with a vendor.
Think about how customers perceive your strengths, as an
organization. For example, what is your
reputation regarding support?
Implementation? On-time and
as-promised releases (Oh, please…!).
Technology leadership? Some of
these strengths represent opportunities to differentiate, beyond your software.
For example, let’s say you have a particularly strong and
active users’ community – and your competition does not. Here’s an opportunity to use a Biased
Question to differentiate:
You say, “Some of the other customers we’ve worked with that
had situations very similar to what
you’ve outlined so far, found that one of the most important aspects of the
relationship with the vendor had nothing to do with the software itself. They found that interactions with the users’
community enabled them to easily solve problems they had previously struggled
with, deploy more broadly than expected, and implement new, unanticipated
applications that were shared within the community. They were able to realize hundreds of
thousands of dollars in additional gains and savings as a result. Is access to this sort of community something
you might also find useful in your
implementation?”
Your customer responds strongly in the affirmative.
You add, “Well, I’d be happy to connect you with some of the
principals of the local users’ group so that you can get introduced right
away…”
The result? Positive
differentiation based on organizational strengths. [The process of identifying these strengths
is known as “Whole Product Analysis”, the term coined by Regis McKenna and
popularized by Geoffrey Moore in Crossing
the Chasm” – really good stuff!]
What About Price?
Really? If you have
to differentiate on price you’ve failed to establish sufficient value – both
with respect to the customer’s problem and
especially the value of your solution.
(Time to return to doing Discovery…!)
Truly Terrific
Competitive Differentiation – What, When, and How
What: Look for
opportunities to differentiate positively – capabilities or strengths that are
perceived as beneficial by the
customer – and be aware of how easy it is to differentiate negatively in the eyes of the customer.
When: All the
time(!); and especially during Discovery, during demo delivery, and during
discussion of implementation and beyond.
How: Through the use
of Biased Questions – and sources for topics can come from either the capabilities in your software or the strengths of your
organization.
[Of course, many Great Demo! practitioners comment that
simply following the Great Demo! methodology is a terrific way to
differentiate, positively!]
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