A successful differentiation has two defining characteristics: (1) It is not imitated by your competitors, even though (2) it brings you unmistakable success with consumers.
Impossible, you say? Not quite. I am about to reveal to you the unexpectedly simple and wonderful secret of successful differentiation. Here it is: Do not look for it around the core benefits of your product category; rather, think "off-core differentiation."
"Core benefits" are the benefits that the consumer already expects to receive from a product like yours. This is the list of what's important to the consumer. "Core benefits" are more than the essential product benefits. The core benefits of today's cellular phones include much more than the possibility of conducting a conversation while you're in motion. Everything that the consumer has already come to expect from products in your category is included in the core benefits. These are the benefits that all of your competitors offer, because they constitute the essence of the product and it is impossible to compete in the market without them.
That is precisely why if you really invest your efforts and are truly brilliant and innovative and make a major breakthrough in improving core benefits—do you know what will happen? They'll imitate you at warp speed. That's what will happen. You must understand that in that case, your competitors can't allow themselves not to imitate you. You'd do exactly the same thing.
Many companies have learned this the hard way:
- Starbucks thought that its coffee shops would be cozier and look more like a neighborhood hangout if all their chairs weren't all identical and if they had easy chairs and sofas. What a great idea! Today, you'll find it in almost every coffee shop in the world.
- Colgate Palmolive combined all of the known beneficial characteristics of toothpaste and created Total. The innovation caught on completely. I would dare to say that there isn't even one manufacturer in the world that hasn't imitated the idea, first and foremost Crest from P&G.
- Volvo created its brand around a central core benefit: safety. It did everything humanly possible! Invested limitlessly! And succeeded—especially in convincing their competitors that it is very important to invest in safety. Today, no one will tell you that safety is Volvo's differentiation.
I could go on and on, but I think you've already gotten the message. So what should you do?
To create a differentiation that won't be imitated, you have to think beyond the core benefits that are (already or even just in potential) considered important in your market. It works time after time. The companies that have succeeded in maintaining their differentiation over the years and weren't imitated even though they were making tremendous profits are those that innovated in qualities beyond the core benefits of their market.
A Naked Differentiation
In Canada, there is a news company that according to no lesser authority than Time magazine "offers the best international coverage this side of the BBC." The company is called Naked News, and it broadcasts upbeat news and current events programs to more than 172 nations daily on the Internet and reaches a potential weekly television audience of 34 million in the United States and many more million viewers in the UK, Australia, and several other countries around the world. Naked News is also available as video on demand in over 1.4 million hotel rooms in North America, the Caribbean, and Europe. The Naked News content is available daily to wireless mobile phones and handheld devices. Naked News digital products are cable- and satellite-ready, and available for licensing in English, Spanish, and French distribution.
Most of what the managers and other workers in this news company do is exactly what their colleagues in any other news company in the world do. But Naked News has a little something that it does differently, and that's the reason that some viewers prefer to watch them (and to pay a premium price!). Tagged "The channel with nothing to hide," Naked News's attractive anchor persons (well, mainly young women) cover politics, business, sport, and entertainment—all naked.
Its differentiation has no connection to the core benefits of a news company. What it is doing in order to make itself distinct seems strange, even shameful and irrelevant to its competitors. And so, the chances that someone will imitate the Naked News are small.
Now, think about Apple. At the beginning, its differentiation was the operating system with a user-friendly interface. That is very important to the customer! As computer users were increasingly regular folks and not computer pros, that user friendliness became an important core benefit. Could Microsoft afford not to imitate it? Of course not! Over the past few years, Apple has changed its approach. Now, its differentiation is based on sophisticated design, an approach that views the computer as a part of the well-designed office, while the Powerbook and the iPod are showpieces. Is anyone in a rush to imitate them? Not really. In general, computers have become less ugly, but no significant competitor sees its computers as an opportunity for designers to go wild in the way that Apple did.
What Are They Waiting for?
Virgin Atlantic is one of the examples I like best. As an airline company (in the usual sense of the term) it's not any better than any of the other companies. It doesn't have better planes or more comfortable seats. It's not on time more often, doesn't fly faster, doesn't serve better food or offer a better timetable of flights than British Airways, for example. But it's a company that almost always does some things differently. But please note—none of these belong to the core benefits of the "airline company" category.
And the result: although Virgin Atlantic has been successful for several years and has taken a good chunk of the market and its competitors' clients, British Airways isn't imitating it. Why? Because Virgin Airlines seems ridiculous. (Remember: It doesn't do things that are critical for the consumer!)
Do you need more examples?
Swatch decided to treat the watch face and band as a design area. What does this have to do with the core benefit of a watch? Exactly! So no one has imitated them.
What about The Body Shop? There's no place for another drugstore chain that actively fights against animal experiments, for the environment, and for the needy wherever they are. No one even thinks about imitating them.
You may say that only a few companies have become leaders by means of an off-core differentiation. True. In fact, most companies never become leaders, nor need they. However, if you are in a competitive market and are trying to make a living, then an off-core strategy is the best chance you have to give a group of consumers a good reason to devotedly prefer you and even create a private monopoly for you.
The Mob and the Mobile
Sometimes an off-core differentiation can become eventually a core benefit. This happened to Nokia. It happens when the differentiation is not really off-core but is actually based on a deep insight into the direction that the market is going and into consumers' future needs.
Early in the 1990's while Motorola was busy developing better-and-better mobile phones, Nokia predicted that mobile phones were going to become an apparel item, a fashion statement. It didn't seem like a core benefit of the category back then. Totally not connected to what a mobile phone is supposed to do. But when the technology of most mobile phone manufacturers became similar, they began to compete over design and Nokia has lost its differentiation.
Open a Window
I'm not trying to argue that differentiation within the core benefits is a bad idea, if you can do it. It opens a window of opportunity for you, until competitors start to imitate you. For Michael Dell, for example, it was enough to become one of the richest people on the planet.
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