If your company makes a widget, and your competitor makes a similar widget, what is going to compel a customer to choose one over the other? Price is often the deciding factor, but customers are more sophisticated now than ever and can comparison-shop easily with the help of the Internet and customer reviews.
That makes it all the more critical to understand and use the concept of product differentiation. This is commonly defined as a marketing process that showcases the differences between products and makes a product or service more attractive by contrasting its unique qualities with other competing products. The result, if the process is successful, is to create a competitive advantage for the seller. Customers will view the products as superior and/or a better value.
Here are tips from some Los Angeles-area executives featuring their advice on product differentiation.
When Barry C. Levin took over at Snak King Corp. more than 30 years ago, he just wanted the company to be really good at what it did.
“We always try to be a little bit different,” says Levin, chairman and CEO. “Quality is No. 1 and consistency is super important. Food safety is paramount. But it’s also good to do something with a twist, something innovative. We are in a space dominated by massive players. The only way we can grow and survive is to be a little different.”
One way Snak King did that was when it came up with a way to infuse flavor into its tortilla chips.
“We put avocados and spices into the base so it’s built into the chip,” Levin says. “That had not been done before. People were making a plain tortilla chip and putting seasoning on top. We were cooking flavors into the dough and doing the topical flavoring.”
Levin says the idea came about through a group discussion that Levin encourages at all levels of his business.
“The crazier, the better,” Levin says, when asked about the criteria for new ideas.
Taking risks is part of the game. Levin recalled a time in the late 1990s when the company wanted to make a corn stick product. It ultimately proved to be a lucrative move and led to the development of product offerings that make up 50 percent of the company’s business.
Steve Streit was trying to transition his Green Dot Corp. bank and its prepaid reloadable cards from a young startup to a more established business, and for the first time, he was facing some pretty stiff competition in its space, including big players like Chase and American Express.
One of the best things Streit, chairman, president and CEO, did to position Green Dot for continued success in a more competitive market was to have trust in the steps he had taken to that point.
“When faced with a challenging time, people often knee-jerk and wander off course,” he says. “It’s extremely common. The best thing we did was not overreact. We allowed time to take its course and monitored conditions thoughtfully. We knew we had a great product, a great value and a strong brand name.”
At the same time, there were some concerns at Green Dot that needed to be addressed.
“It was so tempting to get rid of a fee waiver,” he says. “Those things would have guaranteed tremendous growth in profit and revenue on a short-term basis. But it violated our religious conviction that treating the customer right will lead to decades of success and a position as an iconic brand name.”
If Streit had begun to lose ground with his competitors or if he had seen revenue drop, it could have led to some nervous moments for investors.
Adam Coffey takes every opportunity to engage with his team at WASH Multifamily Laundry Systems. As president and CEO, he works hard to convey an attitude of collaboration over micromanagement. It comes from recognition that the most valuable resource in most organizations is not the hardware.
“People are the heart of your company,” Coffey says. “So it’s all about working with people, inspiring people, giving them an opportunity for personal growth and making them part of something. It’s also saying thank you.
“A lot of times, executives can become closed off from the people in the trenches. It’s unfortunate when that happens. But when it does, you lose touch with what is the reality. What is the customer’s reality? What is the employee’s reality? What’s going on day to day in all these jobs?
“When I saw a job classification, I saw people. I knew what those people did for a living. I understood what their challenges were. It gave me a bigger sense of reality very quickly to where I could assess what the challenges were that we faced.”
One advantage he feels he has is that Coffey considers himself to be a blue-collar CEO.
“I started at the bottom,” he says. “So I remembered after I worked my way up through my career in the Fortune 500 world that I had good ideas when I wasn’t a CEO.”
Whether you’re a manufacturer making widgets or an airline transporting passengers from point A to point B, you need to provide a consistently high level of service should the customer do business with you on an ongoing basis. This is especially true when you’re trying to build awareness of your business and to draw in new customers.
“We always say that hospitality is our tradition,” says Fatma Yuceler, general manager, Western USA, at Turkish Airlines. “We mention it in all our promotional materials, our brochures and everywhere we can that hospitality is a big tradition in Turkey. We consider our customers our guests and so on an airline, it’s like the customers are guests in our home.”
For Yuceler, this means a strong cabin crew, “richness” in the food offered during flights and a deliberate effort to go above and beyond in providing great service.
“Strong customer service makes a lasting impression and so we really put our heart and soul into making sure that our passengers’ experience, from the moment they step on the plane to the moment they step off, is excellent,” she says.
“We are all completing each other,” Yuceler says. “Everybody has strengths and weaknesses. I’m not perfect, and I still have a lot of things to learn. So our priority is to build and grow as a team.”
G.J. Hart’s initial goal in 2011 when he took over at California Pizza Kitchen Inc. as CEO was to talk to people at all levels. It involved speaking to thousands of employees, as well as managers and general managers in 40 cities over four months. Hart also wanted to hear what his employees thought about what CPK could be.
“They get to know you by the way you interact with them,” Hart says. “So for me, it’s seeking to understand where they are, where they want to go as individuals, where they feel like we are as an organization and truly listening to them and asking a lot of questions.”
As employees saw how curious Hart was in what they were telling him and how engaged he was, they began to share their feelings.
“As I ask the questions, they’ll sometimes think twice about how to answer,” Hart says. “That leads to the next part, which is, ‘OK, what would you do about this?’ It’s starting to build that collaborative spirit, which is done through communication. And it’s through communication that people start to build trust. Trust is earned over time, it develops, and they start to feel more confident.”
When you can be transparent and confident in who you are and can drive employees to mirror that, you begin to develop a framework to make things happen.
As Beachbody LLC was being developed, co-founders Jon Congdon and Carl Daikeler knew they needed a “hero product,” something that would lure people to want to be part of the community that they couldn’t get anywhere else.
That hero product ultimately became Shakeology, a line of nutritious shakes in different flavors that would help users achieve a variety of fitness goals.
“The network markets that product and gets people on that as one of the core tenets of what it means to get healthy as a member of that network,” Congdon says.
The problem is the time it took to identify Shakeology as the hero product that Team Beachbody needed.
“You’re not going to find many entrepreneurial people who are pessimists,” Congdon says. “But it always serves you well to understand what the pitfalls might be. In all honesty, one of the pitfalls that we probably underestimated was our in-depth understanding of what it took to run a successful network marketing company.
“But it took us longer to get that hero product ready for market than we thought. So in hindsight, we might have started that network a year later than we did, when we knew we had the hero product lined up. We certainly didn’t make it easy on ourselves not having an immediate source of sales for our coaches.”
Any retail business — whether in the e-commerce space or reliant on a bricks-and-mortar network of stores — will always be driven by the numbers. The number of customers you can get to your website or store will convert to a number of sales, which will convert to a number of repeat customers.
To realize a new vision for Rakuten.com Shopping (formerly Buy.com), former President Roger Andelin needed to promote loyalty.
“The business really boils down to the number of visitors that come to our website and our conversion rate to how many of those visitors buy from us and what the average value of that order is,” he says.
As such, Andelin wanted his team at Rakuten.com Shopping to focus on driving customer loyalty and merchant loyalty. Since the staff at the company is, in large part, composed of people with technology backgrounds, it was a different concept.
Andelin and his team began to implement initiatives, such as a reward points program, as a formalized way of building merchant and customer loyalty. But he also wanted to help merchants connect more with their customer base.
“That is one of the main things that is going to separate us in a meaningful way from our competition. That technology stepping in and facilitating that communication is something that would be pretty unique for a merchant.” ●