Diverse deals demand different differentiation dimensions

By Todd Youngblood

When all you have is a hammer, everything looks like a nail.

Many sales organizations think about their differentiation in the marketplace far too narrowly. While I certainly encourage and applaud efforts to develop a hard-hitting company overview presentation to clearly articulate the unique value the organization can deliver, that is only a first step. Assuming every opportunity at every customer can be addressed by a standardized message is a dangerous strategy.   An overall corporate statement of differentiation, while necessary, is not sufficient.

A second, perhaps more dangerous pitfall is getting caught up in our own hype. As sellers of products and services, we often suffer from the delusion that our offerings are special; truly unique; inherently valuable. We become so committed to our own personal success and to that of our employers that we lose objectivity. To make matters worse, even when we do have a legitimate competitive advantage, our customers often use flawed decision processes that ignore some of our strengths and overlook the other guy’s weaknesses.

Consider the two dimensions of differentiation

A more robust perspective on differentiation is therefore essential. Begin by thinking about the two fundamental dimensions that provide a means to competitively differentiate your offerings; the product/service/company-centric dimension, and the customer-centric dimension. Consider the internally focused method first using a one to five scale.

Selling an obsolete product or service may not sound all that exciting, but I know quite a few people who are very satisfied with their five and six year old cell phones. There will always be a market for technologically Outdated products and services. Think about the antiques business for example, or the horse and carriage rides in many US cities. Think in terms of the “Laggards” in Everett Rogers’ Diffusion of Innovations theory. They are 15% of any market. It is possible to create differentiation with them at this first level.  

Moving up a notch brings us to the Typical. This level represents “industry standard;” that which is widely known and understood by the “Late Majority.” Many alternative sources of supply exist and the competing offerings all look pretty much alike. Still not all that exciting really, but again, opportunities for differentiation exist. Favorable terms and conditions, delivery, service, warranties, etc. can make these relatively commonplace products and services attractive to significantly large market segments.

Advanced offerings include features and functions that represent incremental improvements over and above Typical products and services. They are beginning to "push the envelope," but only gently. The “Early Majority” is buying in. The danger of over-hyping at this level is significant.  A technological advantage is short-lived. Many a sales rep has embarrassed him or herself in the eyes of the customer by attempting to position commonplace features and benefits as “advanced” when in fact, the advance is yesterday’s news. 

The Advanced and Typical levels together represent roughly two thirds of everything that gets sold. That fact points to the need for all of us to recognize that most of what most of us are selling is not, in and of itself, particularly leading edge. We all desperately want to believe that our stuff is inherently better than their stuff, but the fact of the matter is, more than 80% of the time, it just flat is not.

State-Of-The-Art is a frequently misused term. A genuine state-of-the-art offering is real but rare. It fulfills its predecessor’s function better, cheaper and faster, but very few people even know about it yet. As a rule of thumb, less than 15% of what is available for sale can be legitimately included in this category. Only the “Early Adopters,” less than 15% of potential customers, would even consider a purchase.

Innovative product and services comprise about 2 to 3% of the total. Only a tiny proportion of companies and sales reps have anything even close to a “next-generation" version of their offering. Need I reiterate the danger of over-hyping?

The obvious to-do is to be brutally objective in classifying each of your products and services on this one to five scale. Consider the competition carefully and don't kid yourself.

Also, as indicated in the above diagram, breadth and depth of a sales rep’s product knowledge can influence a customer's perspective on company-centric differentiation dramatically. Great knowledge can nudge the perception upward a bit. Weak knowledge can cause the perception to plummet. Shame on the sales rep who is not a genuine student of his or her own offerings!

Now consider the customer-centric dimension

Low Price is certainly a valid means of differentiation in the eyes of the customer. Companies like Wal-Mart and Home Depot have turned it into a science. Most of us, however, even those of us selling commodities, would hate to depend on it for success.

Traditional sales focused on emphasizing Features and Benefits. A depressingly high percentage of professional salespeople still depend on this, for the most part, obsolete tactic. It can still be effective, however, if one is fortunate enough to be selling a truly state-of-the-art or innovative offering, the buyer is relatively sophisticated and the value is fairly obvious.

The leap up to the Process Improvement level is quite significant. The focus here departs decisively from the product or service itself, and homes in on how application of the offering changes one or more customer business processes for the better. To make this transition, a sales rep needs as much or even more knowledge about certain aspects of the customer’s business than even the customer possesses. The key is an understanding of the current process, how it is executed, who executes it and problems associated with it, along with a vision of the nature of the process after application of the offering.

The next step up, to Quantified Dollar Value, quite often puts the sales rep in the position of leading the customer into a new and different world; into the realm of creating a better decision process. The rep is more like a manager within the customer’s organization than an outsider. Quite often when asked things like, "What does that part of your current process cost?" or "How long does that take?" or “What’s the cost of scrapping that much product?” customers reply with, "I don't know, I never thought about it that way before."

At this point the sales rep is helping the customer think like an executive, a CFO, an owner. The discussion has fully departed from the product or service and is focused on finances. As a mentor of mine always says, "Regardless of their SIC code, they're all in the money-making business. Always, always, always state your value in terms of making and/or saving them money.”

(A side note: Having defined, documented and flowcharted the before and after processes as noted above, it is a fairly straightforward matter of measuring how much time executing both the before and after processes consume, the cost of problems, the differences in related support and material costs and doing the math to calculate before and after total costs of ownership or TCO.)

The Quantified Dollar Value step coupled with a firm grasp of fundamental financial concepts enables a sales rep to complete an analysis of the impact of his or her offerings on the customer’s Profit and Loss Statement and Balance Sheet. When all is said and done the Financial Statement Impact rules the roost. It’s all that really matters to top executives, the board and the stockholders.

Consider both differentiation dimensions together

Conceptually combining these two aspects of differentiation provides powerful insights. Mapping product/service/company-centric differentiation from bottom to top on the chart below, and customer centric differentiation from left to right yields four distinct quadrants. It is imperative for a sales rep to make a conscious decision regarding the "Quad" positioning for each opportunity in the funnel.

(A side note: The focus of this article is applying Quad Value Positioning to opportunities. It is also important to recognize that the Quad IV thought process can also be applied to customer accounts as well as individual contacts within those accounts.)

If what you are selling is fairly commonplace and the decision-maker is relatively low level with decision criteria based solely on price and features, you are in a Quad I situation. Given these constraints, everything required to make the decision is almost certainly available on your website. You as the sales rep cannot afford to invest much if any time on this opportunity unless there is some other longer-term potential.

If what you are selling is in the state-of-the-art range, you will often be dealing with a technically sophisticated buyer. This type of individual is intensely interested in features and functions, and is often oblivious to the financial implications other than price. This is a Quad II situation. It's worth investing some time because the customer will be willing to pay for product knowledge, but not too much. (Note well the fact that being reactive in Quad I & II situations can actually be a smart strategy!)

Most reps should be intensely focused on living, thinking and breathing “Quad III.”

Selling with Quad III value positioning is an excellent means to acquire access to the executive suite. Executives are not in the least interested in product and service features. And, as noted above, only about 20% of offerings can ever make it to the top half of the diagram anyway. Here are the facts:

• Most often, your offering is “Typical” or “Advanced.”
• Executives have the responsibility to make and/or save money by improving individual business processes along with the interactions among the many business processes executed by their organization.

In other words, get to Quad III or get replaced by website!

Obviously, selling with Quad IV differentiation is the ultimate objective. The ability to clearly articulate and document before and after customer business processes along with their financial implications is the first, and frankly, more challenging prerequisite. When you're lucky enough to have a truly awesome product or service to go along with that skill, the last move upward is relatively straightforward.

Pragmatic use of Quad Value Positioning

The Quad Value Positioning approach may seem a bit complex at first, but in reality can be applied by following a few simple steps:

• Study the first diagram (Product/Service/Company-Centric Differentiation) and objectively categorize each of your products and services on the Outdated to Innovative scale
• Study the second diagram (Customer-Centric Differentiation) and
  • Classify each of your accounts on the Low Price to Financial Statement Impact scale
  • Classify each of your key contacts at those accounts on the Low Price to Financial Statement Impact scale
• Using the insights from steps one and two, classify every opportunity on the Low Price to Financial Statement Impact scale
• Make a conscious decision with regard to Quad Value Positioning for every opportunity in your funnel
• Develop your prioritized action plan based on that value positioning

Effectively articulating differentiation today is nothing like what it used to be. Our products and services are fading more and more into the background. Good! It's always been all about the customer anyway. The challenge to the sales profession is to become competent in process and financial analysis. The good news is customers lack the skills themselves and therefore crave our support.

Todd Youngblood is Managing Partner and CEO of The YPS Group, Inc.  His 30+ year career in executive management, sales, marketing and consulting has been focused on selling more, better, cheaper and faster with Sales Process Engineering. He describes this approach in his books, The Dolphin and The Cow and Think About It…