In our last blog post, we discussed six ways to differentiate your business from the competition, including product, service, distribution, relationship, image/reputation, and price. We noted that some differentiation strategies are more impactful for businesses than others.

To demonstrate how this plays out in practice, let’s look at some survey data which will help to identify winning differentiation strategies. Based on our survey analysis, one of these areas of differentiation is more powerful than any of the others — by a huge margin.

Differentiation allows you to provide superior value to customers at an affordable price, creating a win-win scenario that can boost the overall profitability and viability of your business. Our research indicates there are six primary ways to differentiate, including product, service, channels of distribution, relationships, reputation/image, and price.

However, not all differentiation strategies are equally effective, and some methods may be more important to invest in than others in order to stand out from the competition. Read on to learn more about these different strategies and the key advantages and disadvantages associated with each one.

Differentiation is providing superior value to customers at a profitable price. If we look at the fundamental equation of business (Figure 1), differentiation may be thought of as increasing value through some combination of more or better benefits or a reduced price. Benefits include product and service performance, but also include availability, image, relationship, and many other performance attributes. Price includes the price charged for the product and service, but also includes terms, total cost in use, paperwork required to complete and track the exchange, and other attributes. Any decrease in price attributes or increase in benefits will increase value.

Unlike most B2C marketers, many B2B companies invest little or no resources (both time and money) in understanding brand awareness, but Harvard Business School Marketing Professor John Quelch challenges this position. His reasons:

• Most B2B marketers cannot economically address thousands of small businesses using the traditional direct sales force.
• If left unattended, individual managers will each do their own ad hoc marketing.
• B2B marketers are realizing that developing brand awareness among their customers' customers can capture a larger share of channel margins and build loyalty that can protect them against lower-priced competitors.

In a world where knowledge is power, what you don't know can hurt you. The good news: It's not so hard to find out what your rivals are up to. Competitive intelligence can drive your strategy, calm your fears about the future, and give your company a competitive edge. Competitive intelligence uses many of the same techniques as market research but deploys them to answer highly targeted and specific questions, rather than to gain insight into broad market trends.

Most B2B companies that regularly conduct market research typically focus on developing a deep understanding of three primary areas:

• Market metrics (size, growth, and share)
• Competitive landscape (competitors, strengths, and weaknesses)
• Product and service performance with the current customer base (customer satisfaction, Net Promoter Score, etc)   

Market and competitive pricing in the B2B sector is often a challenging area for many market researchers to tackle. Actual pricing information is difficult, if not impossible, to discuss using traditional interview techniques, as this information is considered highly proprietary. Often, pricing is not a straightforward matter as it may incorporate early payment discounts, freight, volume discounts, change orders, interest, or other finance charges and many other variants.

In the B2B world, market share is pursued and defended constantly. On a customer-by-customer basis, companies constantly exploit opportunities to take share from competitors and develop strategies to prevent losing share. Sustainable growth is dependent on developing solid strategies in both of these areas. So how do you begin to understand all of the market dynamics associated with developing a comprehensive strategy designed to protect and grow market share?

The cornerstone of any marketing strategy is a solid understanding of what customers truly value and need, then creating and delivering a compelling message showing how your offering delivers measurable value in addressing those needs. 

For most businesses, the concept of market sizing is readily understood but not easily accomplished.  Many get stuck on establishing boundaries or defining the market before they even get to the data analysis and implications of their research. Determining market size can answer strategic questions about levels of investments in the business and profitable growth targets. Market sizing can also serve as a quick understanding of the potential for a B2B market opportunity in terms of volume or value, and is therefore pertinent to business strategy and decision making.