Dif-fer-en-ti-ate v. tr. To perceive or show the
difference in or between; discriminate.
In business terms, to differentiate means to create a
benefit that customers perceive as being of greater value
to them than what they can get elsewhere. It's not enough
for you to be different--a potential customer has to take
note of the difference and must feel that the difference
somehow fits their need better. (Other words that mean
virtually the same thing: Competitive Advantage; Unique
Selling Proposition; or Value Proposition.)
As you are building your business, you can use
differentiation to attract more customers. Once you have
momentum, differentiation allows you to charge a higher
price because you are delivering more value to your
customers. Make a point to evaluate and adjust your
differentiation methods at least annually.
The various methods of differentiating your businesses fall
into four general categories:
Price Differentiation
Focus Differentiation
Product/Service Differentiation
Customer Service Differentiation
Price Differentiation
Differentiating on price is probably the most common and
easily understood method. HOWEVER, for Solo Entrepreneurs,
caution is in order. On the one hand, potential customers
might expect a lower price from you than from your larger
competition because they perceive you as having less
overhead, etc. On the other hand, cheaper prices can evoke
perceptions of lower quality, a less-stable business, etc.
And if you compete on price against competitors with deeper
pockets, you can price yourself right into bankruptcy. Be
creative with this differentiator by competing on something
other than straight price. For example, you might offer:
--More value--offer more products or services for the same
price.
--Freebies --accessories, companion products, free upgrades, and coupons
for future purchases. --Free shipping, etc.--convenience sells,
especially when
it is free!
--Discounts--includes offering regular sales, coupons, etc.
(see cautions above)
Focus Differentiation
For Solo Entrepreneurs, this is the most important method
of differentiation, and in many ways, the easiest. Why?
Because as a Solo Entrepreneur, you simply can't be
everything to everybody, so you must pick a specific way to
focus your business. Once you have done that, you have an
automatic advantage over larger companies because you can
become more of an expert in that one field --and you can
build close relationships with key customers that will be
hard to duplicate. For example, you might differentiate
yourself through:
--Location--take advantage your closeness to prospective
customers.
--Customer specialization--be very specific about what
characteristics your customers will have—for example,
racing bicycle enthusiasts or companies with a spiritual
conscience.
--Customer relationships--know customers really well, form
partnerships with them, and get them to speak for you! --Affinity
relationships--associate your product/service
with a well-known person or organization.
--One-stop shopping--offer everything your target market
needs, in your area of expertise.
--Wide selection (within your niche)—although this one may
seem to be the opposite of focus--the key is to be very
specific in one dimension and very broad in another.
Product/Service Offering Differentiation
How much you are able to differentiate your product or
service offering will vary based on what type of business
you are in. For instance, if you are in a highly regulated
business, your options may be limited. Explore a totally
new market or type of product or service, however, and the
possibilities abound. The key to successful differentiation
in this category, again, is to know your customers, really,
really well. Talk to them often, and you will know what
they need most and be able to offer it, long before your
competitors know what is happening. For example, your
product or service could stand out in one of these ways:
--Quality--create a product or service that is exceptional
in one or more ways. Examples:
--Lasts longer
--Better
--Easier to use
--Safer
--New/First--be the first one to offer something in your
location/field.
--Features/Options--offer lots of choices, unusual
combinations, or solve a problem for a customer in a way no
one else does.
--Customization--as a Solo Entrepreneur, you may be able to
more easily handle special orders than big, mass-market
competitors.
Customer Service Differentiation
Have you noticed how customer service seems to be out of
vogue these days? This situation makes excellent customer
service a great opportunity for differentiation and another
natural advantage for Solo Entrepreneurs that already know
what’s important to their customers. Build your reputation
on making customers feel really good about doing business
with you. Works great with referral marketing, too. Examples:
--Deliver Fast--next day, or one-hour--make it faster than
customers think possible.
--Unique channel--offer a service over the phone or
Internet instead of in person or in their office rather than
yours.
--Service-delight customers!--it may seem expensive to
offer exceptional service--but it pays off in word-of-mouth
advertising.
--Before/during/after-sales support--provide technical or
other support to customers using your product. --You might
use joint ventures to provide that support--but customers
will perceive it as being from you!
--Guarantee/warranty--offer 100% money-back, or free
replacement parts.
--YOU--offer yourself, your unique blend of talents and
skills, to attract customers. Make sure they get access to
you, too!
Keys to Successful Differentiation:
--Know your customers, really, really well.
--Pick a blend of differentiation methods that, in the eyes
of your customers, truly sets you apart.
--Talk about your differentiation in terms of customer
benefits.
--Tell everyone about what differentiates you--often.
--Keep your differentiation fresh by listening for changing
customer needs.
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Terri Zwierzynski is a coach to small business owners and
Solo Entrepreneurs. She is also the CEI (Conductor of
Extraordinary Ideas) at Solo-E.com. Terri is an MBA honors
graduate from UNC-Chapel Hill. Terri has been coaching for
over 10 years in a variety of settings, including 6 years
as a senior-level coach and consultant for a Fortune 500
company. She opened her private coaching practice in 2001.
Contact her at: http://www.FastLaneDreams.com.
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