Differentiate (May 2010)

How do you differentiate your product or service? Even better, how do your customers perceive the differentiation between you and your competitors? These are important questions. And you should answer the first before you attempt to answer the second. It will give you a basis for determining whether you perceive your business in the same way as your customers. Don’t be surprised if your customers perceive your product or service differently than you.

And in case anyone reading this has forgotten: “The customer is always right”. I can think of a number of businesses who were arrogant enough to believe the customer “didn’t get it”. Frankly, they may have been right. But it doesn’t matter; the customer took their dollars elsewhere and those arrogant businesses exist no more.

Find out why customers use your product or service and how you can improve upon it. What keeps them coming back . . . and what will bring them back more frequently or cause them to recommend your business to someone else?

Differentiation is important in both good times and bad. In good times, it allows companies to enjoy higher volumes, profit margins, and expansion. In bad times, it can be the difference between life and death. Generally, players that are able to differentiate themselves from their competitors survive. Customers find a reason to go there (in good times and bad). Companies that deliver a “me-too” experience don’t build customer loyalty. In good times, customers might try someplace else in the hopes of having a better experience. In bad times, customers are all the more tempted to price shop or forgo their purchase altogether.

Think of some recent closures and ask yourself if they differentiated in the marketplace.

Linens-N-Things closed while Bed Bath & Beyond survived. Given the lack of differentiation between the stores, it’s not surprising that one of them was left behind. From a consumer perspective, I can’t think of a reason to favor one over the other.

I think the story is similar with Circuit City who closed and Best Buy who survived. Two big box retailers were fighting in a crowded space. From my home, I could get either one easily but I can’t think of a single compelling reason to have chosen one over the other.

Does anyone remember Hechinger’s of Builder’s Square? They were two of the earlier big box home improvement centers who were beaten by competitors (Lowe’s and Home Depot) who, as far as I can tell, simply built bigger boxes.

A few of these examples continue to exist as on line retailers, but they are mere shadows of their former selves. In any space, businesses need to earn consumers dollars and therefore the right to exist. Without a strong differentiation from competitors, a business is much more vulnerable and therefore more likely to suffer from pricing pressures, loss of market share, and eventual failure.

If your business could benefit from fractional CFO services, I would welcome the chance to speak with you. Please give me a call at (314) 863-6637 or send an email to

your cash is flowing. know where.®

Ken Homza
Copyright @ 2010 Homza Consulting, Inc.

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