At some point in its lifecycle, every company eventually faces the pricing and margin pressure that results from increased competition. This is often a good opportunity to look at both your marketing strategy and value proposition and develop a more targeted message to present to your customers.
Smart Business spoke with Chris Meshginpoosh, Director at Kreischer Miller, about techniques companies can use to differentiate offerings, drive growth and increase profitability.
Why do companies struggle so much trying to find ways to differentiate?
In mature industries, factors that customers consider when making buying decisions are widely known. Companies tend to benchmark their offerings against their competitors, considering those widely-known factors. The result of this is that, over time, companies in an industry tend to all look the same. When you focus myopically on the same factors, it can be very challenging to drive real differentiation.
How do you break that cycle?
In “Blue Ocean Strategy,” W. Chan Kim and Renée Mauborgne introduced a framework that can help companies create uncontested space in the market. One of the first steps in the process is to try to redefine what the customer is buying.
For example, in the real estate industry, it would be easy to assume that most homebuyers are simply looking for help identifying and closing on the purchase of a house. However, the purchase of real estate is often only a small part of one of the most stressful life events: moving. Reframing the customer need in this manner might reveal opportunities to develop an offering that stands out from the crowd.
Once you identify a customer need, how do you make sure your offering is unique?
You need to step back and identify the common factors that customers and buyers always consider when making buying decisions. Once you have assembled that list, start thinking about factors you could completely eliminate.
For example, in our industry, most of our competitors provide audit services to both publicly and privately-held companies. We completely eliminated one factor – auditing publicly-traded companies – which immediately impacted every facet of our business, including the services we offer, the people we hire, the training we provide and our overall cost structure. As a result, we look much different to the market we serve.
Is eliminating factors the end of the process?
Not at all. Next, think about the reframed customer need that was identified in the first step. With that need in mind, try to identify factors that none of your competitors are currently offering. Going back to the real estate example, what if your customers were looking for assistance taking the stress out of finding, buying and moving into a new home?
When put in this larger context, it becomes clear that customers could benefit from assistance with not only identification and closing on a real estate transaction, but also title insurance, financing and relocation services. A client of ours did this and built one of the largest real estate brokerages in the country.
Once you have identified factors to eliminate or add, what are the next steps?
The final step is to consider what other factors you could reduce or raise. For example, if all of your competitors are stressing a factor such as a wide range of products, one option might be to reduce the scope of your offerings.
Narrowing your focus might allow you to go deeper into an important category, as well as reduce costs throughout your supply chain. Many internet retailers have been wildly successful executing strategies like this.
Do you have any final words of advice?
The marketplace is always changing, so these principles should be part of a company’s ongoing strategic planning process. By systematically challenging your team to reframe customer needs and your offerings, you can find uncontested markets, and drive both growth and profitability. ●
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