Do you have a business idea? Not just any idea, but a brilliant one?
If so, after you proceed to build it — after what seems to be forever, you are ready to launch. Then, you survey the marketplace to find a million and one products in the market. How will you differentiate your product or service from competitors?
Building a successful offering requires that your idea stand out from the existing competition. Besides plain aesthetics and elaborate branding, your product needs to be significantly different than any other product that is readily available.
There are 4 ways to do this:
- Be cheaper
- Be newer
- Be better
- Be all of the above
Cheaper Is Good, But Not Great
Products and services, over time, can become cheaper due to a variety of factors including competition. Pricing yourself cheaper is bad in three ways. To start, your margins are lower, so unless you are moving inventory in bulk, it is not sustainable. Two, a more established competitor can start a price war to be cheaper than you and they can sustain it for longer periods. Three, consumers will expect your prices to stay low and will be unwilling to purchase your 2.0 product or pay more in the future.
That being said, being cheaper is still a plausible pricing strategy if you can produce products and services much cheaper than the market rate. This way, the lower price doesn’t eat away at your profits. Or alternatively, it can be a limited time offer to entice consumers to try it out. This allows the early adopters to try out the product and hopefully convert into loyal fans.
Being Better, Even By a Little Bit, Will Do
Creating the “just noticeable difference” refers to product improvements that are very apparent to consumers without being wastefully extravagant (i.e. they are at or just above the just noticeable difference).
Usually, with better packaging or a better branding strategy, marginal improvements will be noticeable. Improving the product marginally through additional features is another way to differentiate.
Change the Game and Disrupt an Industry
Coming out with something entirely new is the best way to stand out. Creating something that was “never before seen” and yet eventually becomes ubiquitously used worldwide is every founder’s dream. The tough part is having the vision.
One way to disrupt is to apply the “Peter Thiel question” to founders: “Do you have a secret?” This means: “Do you know something about this industry, or market, or product, that no one else does?” If you can answer these questions without pause, then you may be onto something.
The Beauty of ‘All of the Above’
The best companies usually do a combination of the three factors mentioned above. This could include launching a product that is cheaper and has more features or an entirely new product that is cheaper than competitive products in the market place.
As an entrepreneur, it is your job to develop products that can stand out from existing products in the market. This means you need to complete market research and understand your competition.
Entrepreneurs are often forced into this due diligence by creating a business plan. Arguably this is one of the most important things to get right when you are developing your product or service.
Your biggest competitors can usually be found in your search results. Don’t over complicate things by listing all the competitors; just figure out how you are going to stand out from the leaders in your segment.
Now go and build your cheaper, better and newer product!
Connect with John on Twitter.
John Fearon is a lifelong serial entrepreneur. His 35 years have taken him from selling sweets as a child, to global digital marketing, to founding Dropmysite.com, one of the fastest growing cloud companies today.
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