Why Your Business Needs a Differentiator: What Sets Your Brand Apart?
If You Want to Out-Perform Your Competitors, You'll Need a Differentiator.
It’s no coincidence that the rise of the internet has coincided with a dramatic increase in competition amongst many industries, thus leading to the need for finding a business differentiator that highlights how your company is unique amongst a sea of competition.
The internet has given entrepreneurs and business owners the ability to quickly and efficiently increase reach and scale at a rapid pace.
The barriers to entry are low and there are fewer factors inhibiting growth. And while more competition is usually considered a positive by most people, it puts a strain on many existing businesses, requiring strategic differentiation.
Finding Your Differentiator in the Midst of Competition
When it comes to modern economics, Michael Porter is widely recognized as a thought leader. And while he has played a role in the creation and explanation of many different theories, it’s his research in the area of business operations and the methods organizations use to remain competitive that has garnered him the most widespread attention in business and academic circles.
Through his work, he created Porter’s Generic Strategies, which is the idea that most organizations use one of three approaches to setting themselves apart:
- Cost leadership: The first strategy is cost leadership. In this approach, the brand tries to gain a competitive advantage by charging the lowest price possible to the consumer. Companies do this by bringing down costs, doing away with superfluous services, and eliminating unnecessary expenses that other companies have to account for when establishing profit margins.
- Differentiation: The second strategy looks less at price and focuses more on the unique factors that the brand or products bring to the table. The goal is to do something that’s so different and attractive to customers who are tired of seeing the same thing.
- Focus: While the vast majority of businesses pursue cost leadership or differentiation, there is a third strategy known as the Focus Approach. Instead of trying to appeal to the widest possible customer base, businesses use this approach to appeal to a very specific demographic or niche by offering a specialized product or service that meets their individual needs.
While all three strategies have their place, the quickest and most effective way for the average business to rise above heavy competition online is to aggressively pursue creating a differentiator that clearly makes them unique from others in your space.
“Differentiation essentially means making your business or brand stand out by offering unique features, benefits, services or other elements of your solution,” explains Neil Kokemuller, a professor of marketing. “This strategy means identifying the most important criteria used by buyers in your market and then designing product, service or other offerings in a way that best meets those criteria.”
In other words, differentiation is all about identifying what’s unique to your business and leveraging that factor to stand out in a segment of the marketplace where every other brand blends in and looks the same. A lot of people call this your brand’s Unique Selling Proposition, or USP.
A USP can involve a product, logo, service, or any other tangible or intangible factor that sets you apart. The important thing is that you find that differentiating factor and use it to your advantage.
Real World Examples of Powerful Differentiators
Talking about differentiation, in theory, is one thing, but what does it actually look like in the marketplace?
Which brands and organizations can you study to get a better grasp on how you actually execute in this area? Let’s examine a handful of examples:
1. Aldi: If you’ve ever shopped in one of Aldi’s more than 1,600 grocery stores around the country, then you know that they do things differently—and this is very much on purpose. They use efficiency as their point of differentiation.
When you shop at Aldi, you’ll notice a lot of things are unique. You have to fork over a quarter to get a cart (and then return the cart to get the quarter back). You have to bring your own bags and bag your own items at checkout. Each Aldi store is only open during local peak hours as a way of keeping labor costs down.
While these may seem like nuisances to someone who has never shopped at the store, Aldi customers are fiercely loyal because they love the efficiency that the store offers (not to mention the low prices).
This strategic point of differentiation has led Aldi to become the fifth largest supermarket in the UK. Stateside, there are plans to add 900 more stores over the next few years. So, you could safely assume it’s working.
2. Rush University: People often forget that colleges and universities are educational brands. Rush University is one example of an educational brand that has strategically leveraged differentiation by selling an experience. They call it the “Rush Experience” and it consists of smaller class sizes, hands-on learning, and access to unique networking experiences.
This approach to finding a differentiator—i.e. selling a unique experience—seems to be working, too. Multiple programs rank in the top of their respective categories in U.S. News & World Report, despite Rush University being classified as a “young” university (less than 50 years old).
3. Ben & Jerry’s: Ice cream lovers all around the world fork over millions of dollars every year for Ben & Jerry’s ice cream, which is a testament to the strategic brand differentiation the company’s expert leadership has established.
In an industry that’s pretty crowded—think Haagen-Dazs, Breyers, Blue Bell, Baskin-Robbins, Edy’s, Dairy Queen, Cold Stone, etc.—Ben & Jerry’s is consistently rated one of the top brands. While the product itself is awesome—who doesn’t love the big chunks of chocolate or tasty fresh fruit?—it’s the branding that really sets the company apart.
Ben & Jerry’s has adopted a fun, vibrant, quirky, and socially-conscious brand that is unlike anything the industry has seen before. As a result, people find themselves reaching for the product over the “boring” competition. Ben & Jerry’s now has an 8.7 percent market share in the U.S.
4 Business Differentiators You Can Use to Stand Out From the Crowd
These are fantastic examples that you could spend hours studying, but what does a differentiator look like for your type of business?
As an entrepreneur who understands the competition in your niche and wants to rise above the noise, it's your job to find a specific way that you can offer more unique value to your customers.
Here are a few practical routes for finding a differentiator that helps you edge out the competition:
1. Specialization: One of the most notable areas of differentiation comes in the form of specialization. It’s why you’ll see certain auto shops only do brake jobs or oil changes. It’s why fast food restaurants sell specific food items. Specialization is why certain car lots only sell one or two auto brands.
It’s hard to differentiate when you sell a little bit of everything. Some brands make this work—such as Walmart or Amazon—but smaller companies need to focus a little more.
2. Unique Business Model: Sometimes your best strategy for differentiation might be to create a new or unique business model. This is exactly what founder Blake Mycoskie did with TOMS Shoes. Instead of just creating another shoe company, he established a “one-for-one” model in which purchasing a pair of shoes for yourself also resulted in the purchase of a pair of shoes for someone in an impoverished country.
A unique business model gives you a unique story—a chance to say, “This is why we’re different.” Think about your product, niche, and industry and see if there’s an opportunity here.
3. Exceptional Customer Service: One of the best ways to differentiate when products are considered to be identical or similar to that of competitors is to offer superior customer service. Not just good customer service—but excellent customer service.
Zappos is the classic example of a company that offers exceptional customer service as a point of differentiation. Not only are they highly responsive and accommodating, but they offer things like free shipping and returns.
4. Creative Controversy: While most companies agree that it’s best to stay away from controversy, some brands have actually found that controversy provides an advantageous point of differentiation in certain situations.
Chick-fil-A and Starbucks are good examples of this recently. When the president of Chick-fil-A was quoted as supporting the biblical definition of marriage in 2012, a media firestorm ensued with lots of notable figures and companies condemning the organization for bigotry. However, the company’s core group of customers—evangelical Christians and conservatives—applauded Chick-fil-A for sticking to its beliefs and the company enjoyed an astounding year-to-year revenue increase from $4 billion to $4.6 billion.
Starbucks, on the other hand, made it clear that they very much support same-sex marriage. And while the controversy in the media was far less noisy, there was plenty of outrage from the right—including a well-publicized boycott. Despite this, Starbucks saw 15-percent revenue growth that year.
The moral of the story is that controversy can sometimes be used as a long-term point of differentiation, even when it seems problematic in the short-term. You probably don’t want to welcome controversy, but your brand doesn’t have to run away from it when the circumstances are right.
Stop Blending in and Make a Statement
Blending in is not a differentiator, it’s a lazy approach to seeing increased competition in your niche.
If you want to stand out, you have a few different options. According to Porter’s Generic Strategies, you can use cost leadership, differentiation, or focus. While there’s a time and place for the first and the last, it’s the middle approach—finding a differentiator—that’s most powerful and applicable for most business owners.
Now, the question is, how will you set your brand apart with a differentiator your customers will care about? Take your time, talk to existing customers, learn from your competitors and put some strategic thought into this question. Your answer will dictate the trajectory of your brand, for better or worse.