Offering customers something of value that competitors cannot or do not provide is the essence of differentiation. The problem is that most companies (and most sales people) focus all their energy and attention only on their products and services or their price.
We often hear sales people complaining that their company’s product portfolio is no different that their competitors and that their prices are just not aggressive enough to beat the competition.
But changing the product portfolio or dropping the price (while it may make things easy for the sales person in the short run) is actually the most expensive and slowest form of differentiation. In fact, a company has the opportunity to differentiate itself at every point when it comes into contact with its customers—from the moment potential customers realize that they need a product or service to the time when they no longer want it and decide to dispose/upgrade/replace it. This relationship life-cycle is known as the consumption chain.
When a company thinks creatively about their customer’s entire experience with a product or service, they can discover opportunities to both position and sell their offerings in ways that they, and their competition, would never have thought possible.
- To facilitate a mindset shift from product/service/price differentiation to consumption chain differentiation,
- To inform sales people how to search for critical value drivers when speaking to their clients,
- To provide a practical vision for how to successfully implement the consultative method of selling in reality, when the sales person is facing the customer.
There is often some doubt that it is actually possible to differentiate against the competition using the products and resources at hand. If one can work together to create a clear and practical vision of how to differentiate against competitors, it will become much easier for the sales team to adopt and use the consultative sales methods successfully and therefore exceed their own sales targets and contribute to long-term growth.
We have found it very effective to hold a series of focus groups with small sales teams, with similar customer profiles, to analyze the entire customer life-cycle and find all the potential sources of value in the consumption chain.
The information gathered and compiled in this focus group would then be shared with the whole sales team as a way of informing them how to search for critical value drivers when speaking to their clients. This would enable the sales team to ask the questions necessary to demonstrate unique value that already exists in the organization’s total offering package. (As a definition of offering we are using: “the total package of benefits the customer receives when he or she buys.”)
More importantly, this information will help to provide a clear vision for how to use the consultative method of selling in reality, in front of the customer.
Of course the process we use varies slightly from company to company and from sales unit to sales unit. But basically the process follows these steps outlined below:
1. Map the consumption chain
- Starting from need recognition all the way through to disposal/upgrade/replacement of the product
2.Analyze the customer’s experience
- At each link along the chain what is the customer doing; how are they interacting with you, your product, etc.
- What does our company do?
- What does our company not do?
- How does the competition do it differently?
- What are our strengths?
- What are their weaknesses?
4.Build value propositions (for each link in the chain)
- What value does our way add?
- What costs does our way reduce?
What we have achieved by facilitating this discussion at various companies in different industries:
- A clear picture of the total customer experience over the entire product life-cycle
- A recognition and consensus of what the customer values highly (and also what they do not care about)
- A list of our points of differentiation against their competitors
- A concrete value proposition for each point of differentiation
- A clear picture of where the customer experience could be improved
1) Mapping the Consumption Chain
Below is an example of a generic consumption chain. This procedure can be applied to any industry, product or service and can be profitably applied to product design, marketing, and sales. It is particularly useful for salespeople operating in a mature market where products and services appear quite similar.
By mapping the consumption chain, the sales (or marketing or product development) person is encouraged to consider the entire customer experience with the organization that delivers the product or service. Each of the links in the chain has activities and attributes that can create cost or generate benefits for customers and therefore need to be considered when customers make a purchasing decision. Total life cycle costs must be deducted from the total benefits delivered by the product or service to calculate a measure of total delivered value.
As sales people, we can reduce the downward price pressure usually applied by customers who only look at product acquisition cost, by helping them to calculate this total life-cycle value.
2) Analyze the Customer’s Experience
This helps us to see what the customer values at each stage along the consumption chain. Basically, what we want to learn is what they like about what the company does and how much it is worth to them. To do this we need to think about how the customer interacts with our Product, People, Processes and Past.
- Product: The features and benefits of the product. This is the baseline of differentiation. To be competitive, the features and benefits of a product have to convey valuable differences to buyers. When there are no or minimal differences, the other Ps in the 4Ps model must be used to differentiate the product or service.
- People: The individual or team working with the client represents another part of the total offering. As a product, the individual or team literally has features and benefits. The level of expertise, ability to get things done, experience with similar clients, and even industry status represent examples of potential features of individuals that can help reduce uncertainty and facilitate buying.
- Process: How the organization does business is a strong potential area for differentiation. If the actual buying, delivery and implementation process is efficient and user friendly, it can be a major differentiator. Careful definition of this process, especially for intangible services, can bring a sense of security to an uncertain buyer.
- Past: Another resource is the combined experience of the organization with the type of issues the buyer is facing.
Questions: Below is a short list of questions that could be used to uncover value at the various stages (links) along the consumption chain:
Awareness of need
- How do customers become aware of their need for our product/service?
- What kind of future proofing do we provide to the customer?
- Do we make customers aware of their needs in a new or unique way, or proactively rather than reactively?
Search and learn
- How does the customer find out about our products or services?
- How do we make our customer’s learning process more convenient and less expensive?
- How is the technical solution designed?
- Who is consulted during this process?
- What resources or information are used?
- How do we make the customer decision making process more convenient and more comfortable than competitors’?
- How do customers select among competing vendors?
- What are their priorities?
- How easy is it to arrange financing?
- What is done to reduce the financing costs?
- How is our product delivered?
- How quickly or carefully is it delivered?
- What is the customer perception of the delivery method?
- How is our product installed?
- Who does the installation or construction?
- How is our product moved around?
- How do we make it easier to do this?
- What are customers really using the product for?
- What fundamental need are they addressing with the product?
- How do we work to help them minimize their operating costs?
- What do customers need help with when they use our product?
- How do we help them?
- How does the company handle complaints?
- How does the company work to prevent future complaints?
- Does the customer need uninterrupted service?
- How do we support this?
- How cheap or convenient is it?
- How fast is it?
- How do we assist in the disposal/recycling of the obsolete product?
- How easy is it to upgrade an existing product to a newer version?
- How do we minimize costs and maximize the lifespan?
- What efforts are made to predict the customer future demands and to plan for them?
3) Identify Differences
Next, we will want to assess the results to identify realistic and valuable differentiators. To do this we need to know exactly how we do things differently than our competitors. Then we can use the Attribute Map to objectively evaluate how we are performing against the competition in the eyes of the customer.
Table 1: Attribute Map
4) Build Value Proposition
What we want to learn at this stage is what is the actual value of the differences. These could be between how we do things and how our competitors do them or between the quality of our people and the competitors’ people, or between our experience and our competitors’, etc.
- What value does our way add?
- What costs does our way reduce?
- What risks does our way eliminate?
- How much is this all worth?
We have found this to be an excellent way of facilitating the shift from traditional (features and benefits) selling to a more consultative approach, with an aim to finding ways to differentiate against competitors even in very mature and highly competitive markets.
One thing to bear in mind though is that competitors catch up very quickly these days, so this kind of awareness building is best done on an ongoing basis and the information fed back to product development and marketing to maintain or build competitive lead.
 MacMillan and McGrath, HBR on Innovation, 2001, p. 132
 Theodore Levitt, Marketing Success Through Differentiation—of Anything, HBR, Jan-Feb, 1980, p. 3.
 MacMillan and McGrath, “Discover Your Products’ Hidden Potential”, HBR, 1997