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Companies everywhere are struggling to differentiate their offerings. They dream of establishing an unassailable market position for their solutions, a position that will enable them to capture a lion's share of the customer's mind and wallet.

But, to their frustration, no matter how enticingly and expertly their portraits of the solutions are painted, to customers their solutions and their competitor's solutions usually end up looking amazingly alike. Painstakingly executed solution differentiation strategies end up becoming one-way tickets to the Value Gap and painful dry-run, no-sale scenarios.

Twenty years ago, Theodore Levitt declared: "The search for meaningful distinction is a central part of the marketing effort. If marketing is about anything, it is about achieving customer-getting distinction by differentiating what you do and how you operate [italics added]. All else is derivative of that and only that."1

Sellers en masse have subscribed to Levitt's view. They first focused on the most obvious element of his distinction formula and attempted to differentiate based on the "what you do" part of the equation. They developed and marketed longer and even more esoteric lists of solution features. They also created ever more complex bundles of products and services.

This focus on solution benefits was legitimate, but two things occurred that eventually rendered it ineffective.

First, the competition quickly imitated the features that proved popular with customers and the distinction between solutions disappeared.

Second, a race to add features ensued, and soon feature-based distinctions exceeded customer requirements and saturation points. When customers cannot use or recognize benefits, differentiation schemes that depend on them become meaningless.

Always in pursuit of differentiation, companies turned the focus of their differentiation efforts on the "how you operate" part of Levitt's formula for "customer-getting distinction."

At its highest level, "how you operate" is represented by the business model on which your company is built. In 1996, Adrian Slywotzky, now a Managing Director at Mercer Management Consulting, published a compelling exploration of the power of business model innovation. In Value Migration, Slywotzky traced the explosive growth of companies such as Nucor, Microsoft, and EDS to their ability to create and operate new kinds of business designs that more effectively delivered value to their customers.

Nucor, for instance, was able to win a leadership position in the hidebound steel industry by building highly efficient mini-mills that were capable of converting scrap into bar and rolled steel. In the late 1990s, the promise and potential of business model innovation also became one of the primary drivers in the rush to e-commerce. These are all examples of what Slywotzky called "a pattern of accelerating Value Migration away from increasingly outmoded business designs toward others that are better designed to maximize utility for customers and profit for the companies."2

New business models, if properly connected on customer problems, can be a rich source of profit. The ability to create a distinctive position in the customer's mind using the new business model is usually a longer-lived advantage than a features-based distinction. But, eventually, business design-based differentiation is subject to the same problems as feature-based differentiation. Competitors adopt a similar value-delivery model (which they certainly will whenever a successful one is discovered), and its differentiation power fades.

By the way, your competitor doesn't have to be fully capable of delivery of the new model; they only have to verbalize that capability in order to disrupt your differential advantage. If competitors are not content to just "me too" your capability, a race for new business designs ensues—and, again, we risk outrunning both our customers' needs and their comprehension levels.

The broad concept of differentiation is not the problem here. Rather, we believe that solution-based differentiation is predisposed to failure. Solution-based differentiation of any kind is an Era 1 and Era 2 marketing strategy in an Era 3 environment. It is marketing that is focused on "what is for sale," a subject that might engender curiosity and, perhaps, a few purchases (usually among the small group of early adopters who always want the latest and greatest). However, it will not generate the level of sales necessary to establish a profitable complex solution.

There is one final, very simple reason why this is true: In complex products and services markets, the majority of customers do not care how "cool" your solution is.

Business-to-business customers care about their strategies and how to execute them and their problems and how to solve them. This is why problem-oriented differentiation, or Diagnostic Marketing, is the most effective way to bring complex solutions to market. The goal in Diagnostic Marketing is to craft targeted messages that engage customers and move them along the "progression to change."3

Progression to Change

The progression to change is a spectrum, measured by physical and objective characteristics, that identifies a customer's propensity to take action to solve a problem. It ranges from the satisfied state, in which the customer has little or no reason to change, to the crisis state, where the customer is compelled to act (which we also describe as possessing the incentive to change). Too often, marketing messages do not take this progression into account.

As individuals advance along the progression to change, they are also moving through the dimension of time, progressing from the present to the future. It is important to recognize both the physical and the mental state. They are physically in the present, which defines their reality, which will of course be judged as positive or negative. As they consider the possibilities of changing they will mentally journey into the future, which undoubtedly holds their greatest desires (the positive future) along with their greatest fears (the negative future.)

The fundamental principle guiding behavior change is this: "People will not change unless the pain experienced by staying the same is greater than the pain to be experienced by changing."

Their behavior and their movement through the progression to change are modeled by the "psychology of change." Recognizing the tangible nature of this progression and crafting the marketing materials and messaging to connect with the individual precisely where they are (the proper tense) and be in sync with their progression to change creates the powerful effectiveness of Diagnostic Marketing.

Excerpted from The Prime Solution. Printed with permission of Dearborn Trade Publishing. (c) 2005 Dearborn Trade Publishing. Quantity discounts available. For more information call 1-800-621-9621 Ext. 4444.

Editor's Note: Don't miss Jeff's upcoming 90-minute Premium seminar on August 18, "Breakthrough Communication Strategies for Today's B2B Market." You'll learn how to create marketing messages that stand out from the pack, engage customers before your competitors will and reduce the sales cycle time, among much more. See more information or sign up here.

Notes:

1. Theodore Levitt, The Marketing Imagination: New, Expanded Edition (New York: Free Press, 1986), page 128.

2. Adrian J. Slywotsky, Value Migration (Boston: Harvard Business School Press, 1996), pages 3-4.

3. For greater detail on the Progression to Change, see Jeff Thull, Mastering the Complex Sale (Hoboken: John Wiley & Sons, 2003), pages 46-49.

Continue reading "Product Differentiation in a B2B Market" ... Read the full article

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ABOUT THE AUTHOR

image of Jeff Thull

Jeff Thull is president and CEO of Prime Resource Group (www.primeresource.com) and the author of Exceptional Selling: How the Best Connect and Win in High Stakes Sales (September 2006), The Prime Solution: Close the Value Gap, Increase Margins, and Win the Complex Sale (Dearborn Trade Publishing, 2005) and Mastering the Complex Sale (2003).


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