Have you convinced your customers that you’re offering differentiated value or have you only convinced yourself?

In September, I spent a couple days at the International Manufacturing and Technology Show (IMTS) in Chicago. As I was making my rounds seeing the products of exhibiting manufacturers, I was reminded of what always strikes me at these shows: how similar all the products look across manufacturers.

So this year as I toured the booths, I decided to add a question to my usual discussion with the manufacturers: “How do you differentiate your company from seemingly similar competitors?”

I heard a few good answers about price and resources. But most explanations weren’t compelling: I heard responses like “We use the best rep agencies” and “We have the right mix of making some of our own products while importing others”. I even had someone tell me that the shape of their booth (an oval) demonstrated how different they are.

The reality is that in the eyes of the customer, many companies aren’t differentiating in meaningful ways. At ICR we conducted a study this summer asking users of cutting tools to evaluate roughly 60 different cutting tool manufacturers by rating them against about 20 statements. We received roughly 2000 evaluations. On the statement “This manufacturer offers something unique and different that I can’t get from other manufacturers”, about 75% of the manufacturers rated neutral or below. In other words, customers don’t see these companies as meaningfully different.

A lack of differentiation is a problem.

Even if you have a solid offering, if you can’t differentiate yourself from competitors, acquiring and keeping new customers is much more expensive. It takes more sales and marketing resources to convince customers that your company is the one to address their needs, and fewer customers come to you on their own. In an industry where cost of sales can run 10-25% of revenue, it matters a lot.

I know… it’s easy for me to sit here at my laptop and say “go differentiate your company”… it’s a lot harder to do it. There are probably more ways to differentiate a company than there are companies; but having consulted to dozens of companies over the past 20 years, I’ve noticed that highly differentiated companies tend to share three characteristics:

  1. Make significant efforts to understand what customers value and how those customers view their companies.
  2. Demonstrate a willingness to confront reality about how they are viewed rather than convincing themselves that they are special.
  3. Institute formal processes that challenge and improve the way they bring differentiated value to their customers on a regular basis.

What I found most concerning about the widespread lack of differentiation is the reaction I received from many manufacturers when I shared their customers’ perceptions. Many disputed it… others challenged whether it mattered. However, a few took it to heart and have launched initiatives that start by understanding what potential customers value and how their capabilities can deliver against those customer values in a usefully differentiated manner. They are on the right path.

Bart Schwartz is President of Industrial Channel Research, a company focused on helping industrial manufacturers understand customer needs and perceptions. He can be reached at bschwartz@icr-survey.com.

Channel Partner Feedback, Customer feedback, Industrial Manufacturers

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