“Good, better, best. Never let it rest. ‘Til your good is better and your better is best.”
– St. Jerome
Competitive differentiation: Vendors want to differentiate, vendors try to differentiate, but most vendors fail to meaningfully and successfully differentiate in the opinion of their prospects. When done poorly, differentiation can be stunningly awful, when done well it can win a lifetime customer!
What’s in this article for you?
- What Is Competitive Differentiation?
- When to Differentiate?
- How to Differentiate?
- Capabilities Beyond Your Software
- Buyer and Champion Enablement
- What About Price?
Let’s explore…!
What Is Competitive Differentiation?
Most vendors define this as “capabilities we have that our competition lacks or that we do better than our competition.” Pretty straightforward, right? But do prospects share this definition? It depends!
Prospects are looking for solutions that fit their perception of their current and future needs. A vendor with capabilities that meet these needs exactly is clearly the best choice, everything else being equal (such as price).
With that in mind, a vendor who seeks to differentiate by simply presenting capabilities that another vendor lacks is at risk. What if the prospect doesn’t see the need for those additional capabilities? What if they don’t care or worse, can’t use them? Then the additional capabilities become a liability.
For example, let’s say you are shopping for a new set of kitchen knives. At the store or online, you are looking at several knife sets and the salesperson or website steers you to one particular set of ten knives, saying, “This set is better because it has ten knives – one more than most – plus a sharpener, so you can keep all of your knives razor-sharp.” The other sets on display only have nine knives and no sharpener.
Sounds like a win, right?
However, it turns out that your existing knife block only has room for nine knives and no place for a sharpener. You are concerned that the extra knife and sharpener will end up rattling around in a drawer, turning into a hazard when you reach in to grab another kitchen tool.
As a result, your view of the larger knife set is that it is “too much” and possibly “too expensive” (if it costs more than the set of nine) or “cheap” (if the price is the same as the set of nine since the perception will be that each knife individually is worth less). Differentiation has occurred, but not positive differentiation!
The world of software is similar.
Let’s say you are looking for a tool that helps you to address availability problems with your website. You’ve decided you want something that sends you an email message with an appropriate link when a problem is imminent so that you can click the link that logs you into the system, find the root cause, and address the problem.
- Vendor One does an excellent job doing discovery with you and then presents a demo that specifically shows email alerts and the ability to drill down and find root causes.
- Vendor Two does a good job doing discovery with you and then presents a demo that shows email alerts and the ability to drill down and find root causes, but also shows alerts for other issues, including cart abandonment.
Who will get the order? Shouldn’t Vendor Two get your business? After all, they have what you need plus additional alerts.
You give the order to Vendor One, however.
Why? In doing discovery with you, Vendor One learned that you already have a system that provides tracking and alerts for cart abandonment and similar issues. Vendor One’s demo was right on target.
Interestingly, Vendor One also had the same additional alerts, but elected not to show them, since you had expressed no need in that arena. It turns out that both vendor offerings were essentially equal in capabilities, but Vendor Two showed a capability you didn’t want or couldn’t use: negative differentiation.
Note also that Vendor One asked a few additional questions in discovery with respect to other alert possibilities. Vendor One achieved additional positive differentiation through the superior discovery.
Despite the above rather sad scenarios for the knife salesperson and Vendor Two, most vendors view differentiation in terms of the features and functions of their offerings. “Ours has this, and theirs doesn’t” or “Ours does this better than theirs does”.
Positive feature-based differentiation only takes place when your prospect agrees that the capability is beneficial for their specific situation. This takes place when your prospect visualizes using the capability sufficiently often and/or recognizes that the problem the capability addresses is sufficiently important to solve.
Otherwise, the extra features and capabilities are perceived as making the offering too complicated or too expensive: “We don’t need the Cadillac/Mercedes; we just want the economy car version…”
When to Differentiate?
All the time!
From your prospect’s perspective, vendors are differentiating, positively or negatively, with every contact, every meeting, every interaction, every communication, and with every deliverable. Let’s explore possible negative differentiation first.
If you were the prospect, how would you feel about:
- Vendors who cold call you repeatedly?
- Vendors who take forever to answer your inquiries or ignore what you asked?
- Vendors who leap right to showing you a “solution,” without discovery?
- Vendors who inflict corporate overview and product presentations on you?
- Vendors who present generic overview demos emphasizing their “competitive differentiators?”
- Salespeople who speak ill of their competition?
- Salespeople who won’t provide pricing information when you request it?
- Vendors who over-promise and under-deliver?
Interestingly, and sadly, the list above is what often occurs with typical traditional vendors and salespeople. Most of us as prospects perceive these items as unpleasant, contributing to an overall negative impression. Unwittingly, perhaps, these vendors and salespeople have differentiated negatively.
Let’s look at the same list again, but with a different vendor approach to each item:
- Nurture or trickle marketing activities (as opposed to constant cold calling)
- Rapid, specific responses to your inquiries
- Thorough and intelligent discovery before presenting solutions
- No corporate overview or product presentations unless you request them
- Crisp, focused, engaging demos of the Specific Capabilities you’ve said you need
- Sales teams that are clear and honest about their own offerings’ strengths and limitations
- Clear and transparent pricing information when you request it
- Accurate, precise solution definition and rational expectation setting
These are viewed much more favorably by you, of course, and equally more positively by your prospects. Vendors who follow these processes are already differentiating positively compared to “traditional” vendors.
In addition to the observations above, there are (at least) three major opportunities to differentiate positively in sales interactions with your prospects:
- During discovery
- During demo delivery
- During discussion of implementation and beyond
That’s “when,” now let’s look at “how!”
How to Differentiate?
During Discovery:
This is one of the most effective ways to outflank your competition. Do discovery with a bias towards the potentially differentiating capabilities you offer, so that those capabilities become part of your prospect’s vision of a solution.
The use of Biased Questions is a highly successful technique of introducing capabilities that you believe should be important to your prospect, but that your prospect has not yet requested. They may also be unaware that such capabilities exist, which is an opportunity for Vision Reengineering.
Here’s an example: Let’s say that your offering provides alerts in the form of email messages when certain thresholds are reached (as many offerings do), but in your case, you can also set alerts based on approaching a certain threshold.
During discovery, you casually comment, “Some of the other organizations we’ve worked with who had situations very similar to what you’ve outlined so far found that the ability to set alerts based on approaching certain thresholds enabled them to act before problems grew large. They were able to save hundreds of thousands of dollars as a result. Is this something you might also find useful in your practice?”
Your prospect responds, “Why yes, that sounds really great – and I can see how we could use that. Wish we’d had it before!”
This capability has now become a Specific Capability desired by your prospect and you can plan to include it in your demo. Since your competition can’t match that capability, you have successfully positively differentiated.
Let’s explore this a bit further. The “Biased Question” method has three elements that make it a successful and compelling approach:
- The Similarity: Your first step is to establish a relationship between your current prospect and current customers, particularly those that are perceived by the prospect as being similar to them.
- The Capability: You describe the capability itself, its advantages, and its potential benefits.
- The Reward: You describe what rewards existing customers have gained using the capability.
Finally, you test to see if this capability sounds useful to your prospect. If it does, you have successfully and positively differentiated.
Look for as many opportunities to differentiate during discovery as possible so that you set yourself up as the dominant or preferred vendor, the only vendor that can provide the capabilities now desired by your prospect. (You can find much more on the use of Biased Questions as well as Vision Reengineering in Doing Discovery.)
During the Demo:
Traditional demos and “overview demos,” in particular, aren’t focused on prospect needs and desires, resulting in negative differentiation. It’s not about more features, as we’ve discussed, it’s about the Specific Capabilities your prospect needs.
Even worse, vendors who consume valuable time with corporate or product overview presentations are also differentiating negatively. Your prospect wouldn’t have invited you to present your demo if they hadn’t already vetted you as a vendor!
Starting your Technical Proof Demo with a Great Demo! Situation Slide, on the other hand, generates positive differentiation. The resulting demo is crisp, focused, and all about your prospect’s needs and desires. By applying Inverted Pyramid structure, you present only as much information as your prospect requires to achieve proof in their minds. No more, no less!
Even better, using the Great Demo! approach, you may frequently find that the time required to satisfy your prospect was less than the scheduled amount. This gives them time back in their day: What a delight!
During Discussion of Implementation, and Beyond:
Traditional salespeople and sales teams are done with their sales cycles when the purchase order arrives, leaving implementation to their professional services team, partner organization, or the customer. Stronger sales teams develop a vision with their prospects of the steps and process of moving the prospect from their current painful situation all the way to completed implementation: the “go live” date.
The truly terrific sales teams pursue this further into the future, to the point where the customer has enjoyed their first small wins, small victories, or initial ROI. This is called developing a “Transition Vision,” the full process of moving beyond implementation and rollout to when your customer begins to gain tangible value from using your software. This is also the point in time when the customer can become a reference.
These small wins are called Value Realization Events (see more in Doing Discovery). Discussing these in discovery conversations causes your prospect to realize that you aren’t just interested in getting the sale, you are also actively interested in their success.
What a wonderful way to positively differentiate!
Capabilities Beyond Your Software
But wait, there’s more…!
Earlier, I said I strongly recommend against inflicting corporate overview presentations on your prospects. Interestingly, some elements from typical corporate overview presentations can be harvested and used to differentiate very effectively, but not in the form of the dreaded traditional corporate overview.
Once a prospect has seen that your offering can provide a solution to their problem, they begin to be interested in learning more about your organization. After all, they are not just buying your code, they are also buying a relationship with a vendor, and that offers other ways to differentiate.
Think about how customers perceive your strengths, as an organization. For example, what is your reputation regarding support? Implementation? New feature delivery? Technology leadership? These strengths represent opportunities to differentiate beyond your software.
For example, let’s say you have a particularly strong and active user community, and your competition does not. Here’s an opportunity to use a Biased Question to differentiate.
You say, “Some of our other customers had situations very similar to what you’ve outlined so far. Intriguingly, they found that one of the most important aspects of their relationship with us had nothing to do with the software itself. They found that their interactions with the users’ community enabled them to solve problems they had previously struggled with, deploy more broadly than expected, and implement new, unanticipated applications that they learned about from the community. They were able to realize hundreds of thousands of dollars in additional gains and savings as a result. Is access to this sort of community something you might also find useful in your situation?”
Your prospect responds strongly in the affirmative, “Why, yes, I hadn’t thought of that before!”
You add, “Well, I’d be happy to introduce you to the principals of the users’ group so that you can get connected right away…”
The result? Positive differentiation based on organizational strengths. (The process of identifying these strengths is known as “Whole Product Analysis”, the term coined by Regis McKenna and popularized by Geoffrey Moore in “Crossing the Chasm.” Great stuff!)
Buyer and Champion Enablement
Much of what we’ve explored so far is oriented toward your prospect’s answers to your questions. However, we can also take a more proactive approach to differentiation by anticipating our prospect’s buying process needs. This is known as Buyer Enablement.
Experienced prospect buyers (and champions) want us to support their buying processes. Buyers know what they need in terms of discovery conversations, solution discussions, proof points, implementation dialogs, and post go-live support. Traditionally, we work to understand our buyer’s desires and deliver as needed. In Buyer Enablement, our job is to anticipate buyer needs and pre-deliver!
Providing our prospects with what we know they’ll need (or what they tell us they’ll need) ahead of time streamlines buying processes by reducing time delays and potential friction. If you know your prospect needs to run a data/privacy check, propose starting that process early in your discussions, perhaps as early as your initial discovery conversation.
If a detailed infrastructure analysis will be required by their IT group, recommend starting that process early, as well. This way, you’ll reduce potential delays as much as possible.
Based on your experiences with other successful sales and buying experiences, make a list of high-probability deliverables, information, or other needs that your prospects may need or want.
Inexperienced prospect buyers and champions need help in two dimensions:
- Gaining an understanding of their own buying processes
- How vendors can support them along their buying journey
Your first step may be to share how other, similar customers have successfully navigated their buying journeys to serve as a template for this prospect. With that guide in place, both you and your prospect are aligned.
Again, good sales teams seek to understand buyer desires and deliver on those desires. Truly great sales teams who have embraced Buyer Enablement anticipate and pre-deliver. This can be one of the most effective forms of differentiation!
What About Price?
Really? If you must differentiate on price you’ve failed to establish sufficient value, both with respect to your prospect’s problem and especially with the value of your solution. Time to return to doing discovery!
Truly Terrific Competitive Differentiation – What, When, and How
What: Look for opportunities to differentiate positively:
- Gain a much richer understanding of your prospect’s situation during discovery that goes far beyond simple “pain,” including demographics, related pains, environment, tech stack, and culture. Uncover tangible value elements and impact statements.
- Introduce capabilities or strengths that are perceived as beneficial by your prospect. Stay aware of how easy it is to differentiate negatively by highlighting capabilities your prospect doesn’t want or need.
- Discuss Value Realization Events during discovery.
- Apply Whole Product Analysis principles to identify other areas of differentiation beyond your software.
- Operate with a Buyer Enablement mindset, understanding what information and other deliverables will be needed at what times.
When:
- During discovery, especially
- During demo delivery
- During discussion of implementation
- Providing certain information and deliverables before they become rate-limiting steps
- All the time!
How:
- By doing effective discovery that goes beyond your competition’s inquiries
- By using Biased Questions and Vision Reengineering
- By communicating discovery information within your selling team, to implementation, and to customer success
- By applying Great Demo! methodology in demos and other forms of proof
- By acting with a Buyer Enablement mindset to eliminate delays and remove all possible friction from your prospect’s buying process
The wise vendor seeks to differentiate in as many dimensions as possible!
