Many companies take on a differentiation approach to compete within their industry, seeking to stand out from the crowd by delivering a unique product or service. Unfortunately, there are many things that can go wrong during the process. Today, we will be looking at 15 common differentiation strategy mistakes that all businesses can learn from.
Developing and implementing a seamless differentiation strategy can be a challenging task for many businesses. From starting with the wrong approach to targeting your audience ineffectively, it is crucial to ensure that the whole process is carefully planned if you don’t want to have the opposite effect.
Before we jump right into our differentiation strategy mistakes, here are a few articles that you might want to check out as well in order to fully understand this approach:
- 13 Amazing Differentiation Strategy Examples (in 2022)
- 5 Differentiation Strategy Risks To Avoid at All Costs
And now, without further ado, let’s go!
1. Mixing strategies
First on our list of differentiation strategy mistakes that companies often make is trying to mix differentiation strategy with cost leadership. In other words, trying to compete on low costs and optimized internal processes while also looking to stand out from the crowd with a unique or innovative product.
Of course, this isn’t impossible, but it’s very hard to pull off, especially on limited resources. One example I can think of is IKEA, which is on my list of cost leadership examples, but it also managed to differentiate itself with a very unique business approach that hasn’t been replicated in 79 years.
Image source: World Economic Forum
The point is, if you don’t have the resources to mix both approaches or don’t know how you would be doing that, it’s better to stick to one strategy and execute it in the best way possible. Otherwise, you are setting yourself up for failure.
2. Focusing exclusively on innovation
While innovation is amazing and it has been driving our development as humans, don’t think about a differentiation strategy as just offering something innovative.
One of the most common differentiation mistakes that companies make is obsessing with innovation without providing value or offering something that the market really needs. It can be innovative, but it still has to satisfy a certain need, otherwise people will simply not pay for it.
Remember, you want to differentiate yourself, and it doesn’t have to be something that no one has ever done before. You just have to find something that makes you stand out, something that you are doing better than everyone else. For example, it can be an outstanding customer service.
3. Not having a clear target audience
Next on our list of differentiation strategy mistakes is not having a clear target audience, or having one but targeting them ineffectively. You can’t have a product or a service without knowing who are your ideal customers.
In my article Shark Tank Marketing: 7 Important Lessons for Businesses, I talked about an energy drink company called Cougar Limited that was trying to differentiate itself in a non-sustainable way, going completely for the wrong audience.
Their main target was “cougars” – a slang for women in the 40s dating significantly younger man. However, they not only tried to differentiate themselves with a rather offensive product, but also failed in identifying an audience that would actually purchase it.
4. Not meeting expectations
One of the most common differentiation strategy mistakes that companies make is not being able to meet the expectations set by your point of differentiation. For example, promising an outstanding 24/7 customer services in all languages when you don’t have the logistics or employees to comply with that.
When undertaking a differentiation approach, think about what exactly do you need in order to meet it. If you can’t gather the needed resources, think about a less demanding one, or simply tone it down a notch. However, it’s of crucial importance to keep the promises you made to your target audience.
Otherwise, they might end up disappointed and frustrated.
5. Copying the competition
Trying to copy your competition is possibly one of the biggest differentiation strategy mistakes that you can make. Remember, you are trying to differentiate yourself – you can’t do that by doing exactly what everyone else is doing, or what the biggest players are doing.
You have to find your own unique selling proposition.
6. Not doing your research
Next on our list of differentiation strategy mistakes is not doing enough research to understand what the market really needs and demands. One of the most emblematic examples is Coca Cola, who tried to introduce an improved flavor to their Coca Cola although nobody ever asked for it.
The company attempted to tweak the classic recipe by making it sweeter than the classic one, although it wasn’t something that the market ever demanded. Because Coca Cola didn’t do their homework to research before launching modifications, it turned out to be a short-lived failure.
The new flavor only lasted for 77 days after its release in 1985, and the company soon went back to their classic, already successful product.
7. Fixing very high prices
Speaking about common differentiation strategy mistakes, another error that can really hurt your company’s growth is fixing excessively high prices just because you’ve undertaken a differentiation approach.
While a differentiation strategy is typically associated with premium prices, as opposed to cost leadership in which you are competing on lower costs and prices, it doesn’t mean that the sky is the limit when it comes to pricing.
Your prices should still be in accordance to the value you provide, and not be excessively high just because you think you can do whatever you want. It is important to develop a clear strategy and justify the price in the eyes of your customers, making sure that your product provides enough value.
After all, customers won’t be willing to purchase a product, no matter how different it is from the rest, if it doesn’t solve their needs.
8. Miscalculating your profit margins
While the cost leadership approach focuses more on reducing costs as much as possible and optimizing internal process, it doesn’t mean that you should underestimate your costs and profit margins.
When you are trying to differentiate yourself as a company, you might end up having higher costs than a company that’s competing with a cost leadership approach. However, you should still aim to optimize your processes in a way that gets you the highest profit margins possible without sacrificing value or quality.
After all, while your goal is providing value and delivering customer satisfaction, you are a still company that’s in business in order to generate profits.
9. Trying to reach everyone
Our list of common differentiation strategy mistakes continues with a very frequent error – not niching down and trying to reach everyone instead. Whether you are going for cost leadership, differentiation or any other strategy, it’s essential to build your target audience.
One way in which you can niche down is by creating buyer personas that represent your ideal target audience. You can get started with this free tool by Hubspot.
Differentiation strategy mistakes: niching down with buyer personas.
10. Not taking into account possible threats
You might think that you have a very solid differentiation strategy that no company can compete with. However, one of the most common errors that businesses make is underestimating their competitors and their resources to copy or even improve upon your differentiation point.
For this reason, it is very important to identify possible threats that may come not only from your competition but also from other factors such as economical, political, etc.
One great way to tackle this is to perform a SWOT analysis so you can have a very clear understanding of your current situation and what may change in the future.
11. Not being honest with yourself
Our list of differentiation strategies mistakes continues with the lack of honesty – more often that not, companies tend to overestimate themselves and underestimate competitors. Be careful when trying to claim that you have something that nobody else has.
By conducting a SWOT analysis, you will not only identify opportunities and threats, but you will also take a better look at yourself and your strengths and weaknesses. Once you’ve done this exercise, you will be able to have a more clear and honest perspective of your company and your differentiation strategy.
12. Relying too much on Marketing
Just like exercise can’t outrun a bad diet, good Marketing can’t outrun a bad product or business model. Before going all in with your Marketing strategy, make sure that you have a good product and a solid differentiation point first. And then, you can focus on promoting them.
However, not caring too much about your product or whether you are really able to differentiate yourself the correct way is one of the most common differentiation strategy mistakes that companies make.
13. Not creating a personality for your business
A good differentiation strategy doesn’t end up with a unique aspect of your product, service or business. It is also important to build your company’s personality. This way, even your competitors replicate your product or service, you will be able to stand out nonetheless because people love your business for what it is as a whole.
One great example that I can think of is Mailchimp – while there are many Email Marketing automation tools on the market, there is something fresh, unique and user-friendly about them that is able to maintain your attention.
Differentiation strategy mistakes: not having a personality for your business. Mailchimp example
14. Not having a clear Marketing message
Next on our list of differentiation strategy mistakes is not having a clear Marketing message. You might have found the perfect differentiation point that makes your business stand out from the rest – but are you able to explain this to your customers?
You should be able to clearly explain what is it that differentiates you, what unique value you provide compared to your competitors, and how all of this benefits your customers.
If you are not able to do this, even if you have the best differentiation strategy, potential customers might not understand it and appreciate it.
15. Getting too influenced by trends
And last but not least, we have another one of the most common differentiation strategy mistakes – jumping on current trends and following the hype without having a clear strategy, vision, and comprehensive research to determine if this will continue in the long-term.
A lot of trends go away as quickly as they came – be careful when jumping on them only to take advantage of their temporary boom. It’s important to think long-term and build a sustainable differentiation strategy.
And that was all from me for today! As always, thank you for reading my article on the most common differentiation mistakes that companies make, and I hope to see you in the next one! If you have any questions, don’t hesitate to let me know in the comments below.
