In the halcyon days, marketers could put almost anything into the market and it would sell (does anyone remember Pet Rocks?) Such are not these days anymore. With a slow growth economy, marketers have to differentiate their products and services. According to BusinessDictionary.com product differentiation is defined as:
Development or incorporation of attributes (such as benefits, price, quality, styling, service, etc.) that a product's intended customers perceive to be different and desirable. Advertising and promotion of a product is based on its differentiating characteristics.
What is important about this definition is its focus. It, by nature, is customer focused. What the marketer or business thinks is irrelevant, it is what the customer, and by extension prospect, think is important that drives our differentiation efforts.
How do we know what the intended customer believes is relevant? Well that sounds like a market research issue. In fact it is at the heart of any customer insights program. Regardless of whether we are researching consumer markets or involved in B2B market research we have to keep a pulse check on what the customer feels is relevant to buying decision and how they believe our company’s offerings compare against those metrics.
In Theodore Levitt’s landmark publication The Marketing Imagination he speaks of differentiating on anything. We must strive continuously to find what is critical to the customer and build it into our marketing process. We are tempted to compete on the basis of price, but that alone will lead to market decline.
From a research point of view, it is advised to build into your program a series of studies that capture the essence of differentiation. Product differentiation as a strategy relies on research from multiple perspectives including; product and brand positioning, key purchase drivers, messaging, and competitive intelligence.
It is important to keep in mind what is important to new customers may be different than what is critical to existing customers. High value customers may also see things differently than lower value customers. Product differentiation research must incorporate the perspective of not only your customers, but those of your competitors. These studies should be conducted in a blind fashion, where the respondent does not know who is sponsoring the study, to avoid potential bias.
Even in a slow-growth economy there is no reason to let price be the only leg you stand on. A well-researched differentiation strategy will allow you to grow your market without sacrificing your entire margin to do so.