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The Surprising Drawbacks Of Competitive Differentiation


The Surprising Drawbacks Of Competitive Differentiation

One of the most frequent questions I get relates to competitive differentiation: how to “stand out” in a crowded marketplace. Many of my clients in professional, financial or technology services spend a good amount of time wondering how they can help clients see how their firm is different. The underlying implication is that different = better.

Sound counterintuitive ? Let me explain.

In a recent HBR-article on “How You Can Win Without Competitive Differentiation”, London Business School professor Freek Vermeulen talks about how recent thinking in corporate strategy is moving from being influenced by the field of economics to the field of organizational sociology.

“The trick is that when there is uncertainty about the quality of a product or service, firms do not have to rely on differentiation in order to obtain a competitive advantage. Whether you’re a law firm or a hairdresser, people will find it difficult – at least beforehand – to assess how good you really are. But customers, nonetheless, have to pick one.”

In short, asking yourself “how are we different ?” may be the wrong question to ask. Buyers are influenced by a seller’s (firm’s) status, prior relationships and their social network ties. Not by how “different” they are.

Is competitive differentiation overrated?

In the – excellent – Buyersphere 2013 report, a whopping 66% of buyers reported “I heard of them before we started the buying process” as the #1 reason why they selected a particular firm for their project.

And – in spite of the #1 factor why buyers chose one firm vs another being “educated me with new ideas and perspectives” – in RAIN Group’s recent research on “What Sales Winners Do Differently”, fully one third of the Top–10 factors driving buying preference were about the seller connecting with the buyer in a way that inspires trust, confidence and familiarity.

Related: 6 Deadly Sales Phrases That Will Instantly Kill Your Deal

Human evolution has wired us all in a very particular way – when faced with decisions that involve even a moderate degree of complexity, we seek ways in which to reduce the risk involved and “take shortcuts” to deduce which decision is the best one.

In short, we seek what’s similar, not what’s different.

When it comes to complex, high-end services, telling buyers how you’re different may be betting on the wrong horse. Breed familiarity first.

Think competitive differentiation later.

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