Market Differentiation

by Victor Cheng

Most CEO business owners completely misunderstand the point of market differentiation. They think that being different in a marketplace means doing what your competitors do, but better.

You see this a lot in the computer industry. One company has a computer that has 1 gigabyte or RAM, with a 150 gigabyte hard drive. The next company offers a similar computer that has 1.5 gigabyte of RAM with a 200 gigabyte hard drive. It’s all about playing the game of one-up-manship with competitors.

Market differentiation does not mean more of the same.

It means being, well, different.

Not more of the same, but rather more of something entirely different.

The video above illustrates this point perfectly and shows how one company has generated $28 Billion in sales by selling products that are very different than their competitors – substantially worse in 3 key areas which enables them to be head and shoulders better than competitors in 2 other areas.

Remember: Compelling market differentiation requires SACRIFICE.

It is very difficult to have your product be dramatically superior to your competitor’s product in one key attribute, unless you’re willing to make your product substantially inferior in other attributes. The reason Ikea can deliver very style furniture extremely inexpensively is precisely because they deliberately make their products less durable and force you to install in yourself. Both decisions make it possible to invest in style and lower prices (while still maintaining healthy margins).

Comments

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Kevin Kilbride May 27, 2010 at 10:03 AM

Great tip Victor! Sometimes you have to go back to basics. You aren’t unique if you don’t offer value to the customer. And it has to be different from your competition otherwise you might as well be selling their products as well.

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