While the economy is beginning to show signs of recovery, companies continue to face a brutal business environment. Competitors are cutting prices, simultaneously introducing new products and adding features to their existing product portfolio. What can you do in this highly competitive environment?

Essentially, you are faced with one of two fundamental strategies: become the low-price provider in your category or industry, which requires a cost structure lower than your competitors, or substantively differentiate your products from your competitors'.

Many firms try to accomplish the latter by creating additional products or upgrading their existing products with incremental features. For example, Kellogg's Eggo waffles come in 16 flavors, and my local supermarket offers seven types of turkey breast. However, while the aforementioned companies are providing options, what meaningful value are these incremental product improvements really providing?

Additional products and upgrades are often competitively driven without any real understanding of how much additional value is being provided to the customer. Companies merely copycat their competitors without investigating what solutions their customers value.

This strategy of continually upgrading products, while seemingly a necessity to keep on a level playing field, provides little in the way of true differentiation.

The Consumer Electronics Association estimates that more devices have been launched from 1998 to 2003 than during the entire previous history of the industry. However, beyond a few core innovations, such as perhaps PDAs and digital cameras, what real value has been added? The path out of this reactive new product doodad strategy is to shift your perspective from being product driven to being customer-value driven.

A true differentiation needs to be somewhat sustainable and difficult to replicate. This is especially troublesome with physical products (versus service-related products), because the functions performed by your most-recent nifty product or feature is quickly copied. Research reflects that even the most sophisticated functionality provided by new products is replicated within three to six months.

Think of Proctor and Gamble spending all that money on developing the Swiffer only to have numerous competitors duplicate the functionality in a matter of months. While one might say that this is the inevitable nature of our competitive system, there are other approaches that will yield a more sustainable and difficult-to-replicate value proposition.

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ABOUT THE AUTHOR

Ed Hellenbeck is an assistant professor of business administration/marketing at Saint Joseph's College and an independent consultant focusing on customer value delivery and customer service. He can be reached at ehellenb@sjcme.edu.