Not all product differentiation is created equal

If you’re a product manager or product marketer, you’ll have likely heard your sales team or marketing teams grumble “we’re not differentiated enough, we need more stuff that our competition doesn’t have”. Clearly this is a noble goal, but not all differentiation is created equal.

Absolute Differentiators

When sales teams ask for differentiation, they’re usually referring to having capabilities that the competition simply doesn’t have. Let’s call these Absolute Differentiators because they’re binary — you have them and the competition doesn’t.

A good example of this was Ford’s Quickclear windscreen. It is a system of minute wavy electric elements embedded in the windscreen to clear all the condensation away. Pretty much every car on the market has a rear heated windscreen, but because they’d patented it, for many years, they were pretty much the only auto maker to offer a really effective solution on the front.

In the tech industry Absolute Differentiators are often eroded quickly as once one software product has figured out a market need and brought it to market, the rest of the market can follow. For this reason Absolute Differentiators tend to be a feature of the early stages of a market.

Protecting Absolute Differentiators

Naturally there are a number of ways that Absolute Differentiators can be protected. The most obvious of which are patents. Patents work pretty well in the physical product world, but are arguably much less effective in the software world. For a start, not every country allows software patents. The process of getting them is expensive, drawn out and often time consuming. But on the plus side, if the new capability is genuinely differentiated and innovative, then it really can be worth embarking on.

If patents are not appropriate, then simply not disclosing the inner working may be effective. In the instance of AI based products, assembling sufficient training data may be an obstacle that will delay a competitor in getting the feature up and running.

Quantitative Differentiators

Over time, Absolute Differentiators get reduced to table stakes as the industry catches up. There are two common solutions:

(1) Keep churning out Absolute Differentiators — the challenge is that it becomes harder to find innovation that people really care about. A great example of this was Apple’s 3D touch. It debuted on the iPhone 6S, but failed to recolutionize the world in the same way “pinch to zoom” did. Over time these new Absolute Differentiatiors will tend towards being spurious or eliciting a “meh” reaction from the audience.

(2) Stop focussing on being the only one offering that feaure and instead quantify the ways yours is better. These are Quantitive Differentiators.

A great example of Quantitive Differentiators were the PC wars of the 90s and early 2000s. Every few weeks a new wave of models would appear with a bump in specs. Differentiation was achieved by trumping the competition’s 16GB hard drive with a 20GB hard drive.

We saw this trend in the mobile phone network wars where differentiation was created mostly on a quantitative basis. It seemed like every month one network had leapfrogged their competitors to differentiate on bundling more minutes or text messages.

Like Absolute Differentiators, Quantitative Differentiators have a shelf life. Eventually the quantity becomes enough. My last mobile phone plan had 4,000 texts and 4,000 minutes per month included. If someone offered me 5,000 or 10,000, I can’t imagine I’d care. This appears just to be a function of a maturing market.

Whilst the late stages of Quantitative Differentiation might seem like a discouraging race to the bottom, earlier in the market cycle it can be a powerful weapon especially when coupled with a savvy pricing strategy.

Qualitative Differentiators

While the PC wars were throwing jargon and numbers back and forth, Apple was waging a different war: Qualitative Differentiation.

Rather than telling us they had twice the memory or faster CPUs, they focussed on two things: Simpler and just plain cooler. Apple just kept telling us again and again that their offering was less confusing and cluttered.

Even in the world of B2B, Qualitative Differentiation can be a powerful tool in the decision process. Establishing a product as being “Better for enterprise” or “Designed specifically for [media] professionals” certainly creates a mini category that the competition are somehow not quite a part of.

Pros & Cons

Qualitative Differentiators have the benefit that they have longevity and are enormously difficult to erode. Despite both platforms having converged to being basically the same, even to this day, people have the perception that Android phones are complicated and iPhones are simple.

The major challenge with Qualitative Differentiators is establishing them. It requires a talented marketing team, probably substantial budget and effective control over messaging such that the entire company is continuously putting out the same message.

Performance Differentators

Given the difficulty of truly establishing Qualitative Differentiators, it’s useful to think about another option, which works well for both B2C & B2B scenarios: Performance Differentiators.

What they’re not

Before we look at what they are, let’s take a moment to highlight what they’re not — Performance Differentiators are not simple claims linked to Quantitative Differentiators. For example claiming that your processor is 5x faster than the competition is not a Performance Differentiator, it’s just a Qualitative Differentiator in disguise.

Performance Differentiators are claims that can be made about improvements in performance that someone will experience using your product. For example “sales conversion improved by 18% vs legacy products” or “proven to shave 15 seconds off top athletes' 5k times”.

On the face of it, these may sound like cheesy lines from adverts, but they can be employed to start the buyer thinking about how the product will change their life. This can be built upon with ROI tools or other calculators to make it real for them. In many ways they’re the yin to a Qualitative Differentiator’s yang. Where Qualitative Differentiators resonate with someone in an emotional way, these connect intellectually. Using them in combination can be powerful as it appeals to both sides of the brain. For example a video editing app might establish the Qualitative Differentiator that it’s “designed to make you more Creative” and a companion Performance Differentiator might claim that “8/10 highest grossing movies were edited with MyVideoApp Pro”.

Proof is critical

Because Performance Differentiators, if done badly can whiff of cheap marketing fluff it is important to support them with quality data or research. In the above two example it should be easy to show a table or bar chart of highest grossing movies and highlight the ones edited with the application.

The earlier CRM example of “sales conversion rates improved by 18%” really needs a large corpus of data to support it. Having one or two case studies that show performance improvements are one thing, but having data agregated from hundreds or thousands of sales teams is compelling. However this clearly gives a huge advantage to the market leader who will (presumably) have more data to harness — that is of course assuming that their product is indeed better at one or more performance dimensions!

But it’s not all about marketing

Performance differentiators can be useful goals for Product & Engineering teams. Having a goal to build towards expressed in the terms of differentiation can be very powerful as a north star. This is probably worth a whole post, so I will likely open this topic up in more detail in the future.

Wrap up