Product Differentiation – What Does Your Product Do Better?

Being ‘better’

We all know that successful product management depends on identifying a customer’s needs or wants and then delivering a product or service that satisfies these. However, in an increasingly competitive environment, product managers must be able to satisfy these needs in a way that is ‘better’ than competitive offerings.

Look around at any industry or segment and pick a few brands or products that you know of. Consider them for a moment: How do they differ? How are they similar? Does any one stand out from the others in delivering a better experience? Do they deliver this better experience to a narrow or niche market segment or to a wider audience?

Differentiation in product management

The concept of differentiation seeks to identify and highlight ways in which one product is different to others. The desired outcome is an understanding or recognition within your target audience that your product is different from competitor offerings.

We suggest that product managers need to go one step further – it’s no good having a goal of simply being perceived as different. We believe successful differentiation requires that a product:

  • Differs from competitors in ways that are relevant and of value to the target audience
  • Does these things better than competitive offerings

Understand the problem

A fundamental part of product management is to understand the problem before you design the solution. Set yourself a focused but flexible context and seek to understand the problem in detail. Why are they experiencing this problem? What is the impact? What would happen if the problem was removed? What would need to happen to reduce or remove this problem?

Once you are able to define the problem you should then investigate the factors of value your target audience care most about. What parts of the problem bug them the most? What parts are only minor?

Using tools such as the value curve can be a simple and easy way to help you begin to understand these factors. You should be continually looking at these and re-assessing your product at all stages in the lifecycle – from development through to ongoing management.

  • Features: Which features does your target audience value most? How would they define a good result vs. a great result? Can you tailor your product around their most important needs? Can you scale down or remove features that aren’t that important? Be harsh – it’s better to do a few things really well than all things only marginally.
  • Support and service: Can you provide a different level of service to make your product more relevant for your target audience. Will a premium service be attractive? Can you scale this back? Five star hotels depend on exceptional service for success but budget airlines actively reduce their service offerings in order to save costs and this works for their target audience.
  • Price: How do you price your product? Do you have multiple product offerings with different price points? Could you introduce new pricing plans such as subscription or leasing models rather than upfront payments?
  • Distribution: Product managers should challenge assumptions about distribution. If your phyiscal product has always been sold via retail chains consider whether you should be selling your physical product online. Could it work as a download? Could you offer it through another channel and charge a third party so as to offer the product to your customer for free?
  • Branding: By understanding your target audience and the factors that they value most you can focus your branding so that it resonates more clearly with them. Whilst this may be a more emotive and artistic form of differentiation it is very important – you only need to look at luxury goods to see how important a role branding plays in differentiating from other products.

Our recent blog post about the different ways in which product innovation can be carried out is relevant for differentiation. It highlighted that innovation efforts – and thus factors for differentiation – can be based not only on product features and functionality, but also in the way products are built, financed, sold and branded.

From product development to positioning

Understanding how you should differentiate your product should prove useful in your product development and re-development efforts. It should also be incorporated into your product positioning activity – your value proposition and key marketing messages.

In your messaging, try to focus on those factors that are most relevant to your target audience and where you offer good or greater value than your competitors. Avoid reference to factors that are irrelevant to the audience and be cautious with those where your competitors are better than you. It’s not a good idea to twist statistics to try to position your inferior product as somehow better than an obviously more capable product. Customers are wise enough to see through this deceptive marketing and it can actually do you more harm than good. Plus your competitors could easily come back and quash your claims with data of their own.

Implications for product managers

Successful differentiation depends on understanding your target market segment needs and then developing and positioning your products to meet these needs more effectively than your competitors. Product positioning is an ongoing activity and product managers must remain aware of where the market is heading and continue to refine positioning efforts over time.

How does your product differ from competitor offerings? What do your customers love about your product? What do they hate? If you removed branding would customers be able to identify your product or service from a rival’s?

  • Price: How do you price your product? Do you have multiple product offerings with different price points? Could you introduce new pricing plans such as subscription or leasing models rather than upfront payments?