When Differentiation Matters

Working out the right time to invest in this tricky part of the positioning process

Whenever I’m getting to know a new client, the word ‘differentiation’ comes up a lot. Understandably, every business feels a need to stand out from the competitive space it plays in.

And it’s undoubtedly a factor in consumer decision making. In saturated markets, there are deep, non-coincidental reasons why people buy one product over another. Whether it’s clothes, cars or software, the brands we buy (consciously or not) represent a choice.

The trouble is that achieving genuine differentiation is a lot tougher than it sounds. If something is a good idea, then everyone does it. And what I’ve come to realise over the years is that you don’t always need it. Sometimes the sheer wave of a new market category, or a relentless focus on a certain target audience, is enough.

So here’s my take on when differentiation matters, and when other elements of your positioning should take priority.

Positioning has many ingredients

When you run a positioning process for your product, you’re making decisions across several key areas:

• Who you’re for (your target customer)

• What you do (your product or service)

• What value that delivers (the outcomes customers get)

• What else is out there (your competitive alternatives)

• How you differentiate (what makes you unique)

But not every positioning decision needs to rely heavily on the differentiation component…

When a new category emerges

Sometimes the category opportunity is so large that competition simply isn’t your problem yet.

When a popular new market category emerges, your job isn’t to differentiate from competitors. It’s to build a strong go-to-market motion, create a great product experience, and explain the category itself with crystal clear messaging. To ride the wave of opportunity and capture as much of it as possible while things are moving fast.

Here, the “new world versus old world” story is likely enough. Your positioning is about helping buyers understand why this new way of doing things matters, not why you’re better than the other startups trying to do the same thing.

When audience focus is your strategy

I’ve written before about how your target audience is a critical ingredient in the positioning process. In fact, sometimes, it’s the most important element.

A relentless focus on who you’re for can be enough of a strategy in itself - building a product, a brand, and an entire go-to-market approach around one specific segment.

Think about products built for developers, or for finance teams, or for Gen Z. The positioning isn’t so much “we’re different from the competition.” It’s “we’re built for you - and we get you.”

When you nail this, your target audience feels seen in a way that your more generalist competitors can’t replicate.

When you’re building the category together

Early in a market category’s life, before it’s truly taken off, you’re not really competing with the other products in your space. You’re almost in an alliance with them.

You’re collectively trying to convince buyers that this new kind of product is worth adopting. That the old way of doing things needs to change.

In this scenario, differentiation is a distraction - perhaps even a hindrance. Customers are still trying to understand whether they need a product in this space - they’re not ready to get into the details of which product has unique features.

With this kind of market dynamic, it’s better to focus on articulating the category value, building credibility for the space, and making it easy for buyers to agree that they have a problem you’re trying to solve.

When differentiation becomes essential

But when markets mature, the game changes and differentiation becomes a necessary part of your story.

You know you need to differentiate when:

• The market is busy and noisy

• Customers are telling you it’s unclear why they should buy your product

• The category is mature, saturated and fragmented

• Customers have many credible options

• Buyers struggle to tell competitors apart

• Your win rate is declining against specific competitors

• Price is becoming the main decision factor

This is where a lot of B2B software companies find themselves today. And it’s only going to get tougher as we enter this new era of technology.

There are no product moats

There aren’t many features your competitors can’t replicate quickly.

Product differentiation is increasingly temporary. Technical moats are shrinking. Feature parity can be achieved faster than ever. So it’s very unlikely you can differentiate on product capability alone.

But if features can be copied, how do you differentiate?

Differentiation through narrative

Your differentiation has to come from the longer-term story you build.

This can still bring together parts of your product offering, but you pair this with elements of your brand, ethos, the philosophy of how you build, and other ways where your company is distinct.

Weave this all into a narrative that resonates with your specific target audience, positions you distinctively in the market, and makes your value obvious in this context.

Find a story that competitors can’t credibly own, even if they copy your features.

Choose the right time

Not every product needs to lead with differentiation. But most B2B software companies today have a need to at least answer the question.

If you’re in a crowded market where buyers can’t tell you apart from competitors, differentiation becomes a business imperative. And the companies that figure out their unique story - and invest in telling it - will be the ones that win.

This is where a strong product marketing team comes in very handy. And if you need help figuring out your company’s story, let’s talk.

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The Product Marketer is a London-based consultancy, helping ambitious companies across Europe - and the wider EMEA region - unlock growth through world-class product marketing. Get in touch if your company has a product marketing gap.