Ok now comes the most critical issue of “yeah I understand differentiation but how do I do a valid differentiation rather than doing for the sake of doing”. Let me give me an example to showcase the issue. I want to start a tooth paste company and I want to differentiate as the market today is very saturated. What is the differentiation or what the traditional marketing calls as the USP going to be? It cleans your teeth of course, real white, mouth freshening too and removes plaque, cavity etc. and all are taken over already (by your competitors). How about we provide a way to give you a feeling of chewing a bubble gum along with cleaning your teeth!! That’s a nice differentiation but the question is who wants it. Can’t they just chew a bubble gum to get that feeling? Are people asking for it? Or when you provide will they like it or prefer it?
So here comes the real problem of finding the right differentiation and this is what I suggest the RD2 (RDSquare) Test as a way of validating the same (Refer to Killer Differentiators by Jacky Tai and Wilson Chew)
R – Relevance
D – Desirable
D – Defensible
The most important thing is, will your differentiator be relevant (R) to your customers (or a segment of customers). One needs to answer this before appreciating the value of being different. The bubble-gum effect might not be so relevant but assume you come up with Sugar Free tooth paste and it is relevant to your customer segment which is the diabetic crowd and also those who are health watchers.
Once we know there is good relevance to your chosen customer segment that you are attacking, time to see how desirable (D) the difference is. Difference is great, relevant but should be desirable too (else they may not buy your product for that differentiation). Going back to the same sugar free tooth paste, I say that it is desirable because it will help control sugar level in the diabetic patient and by not using they are not only risking their health but also the cost of the treatment. Yes it is very desirable. On the other hand look at this difference which is relevant but may not be desirable. Let’s pick the same toothpaste example where in it makes bubbles like ghost or evil characters – good differentiation and relevant too (for kids) but not desirable as no parent (or say most) will buy that (not Disney characters, as that will be a different story 🙂 ).
Then comes the toughest one in my books, how defensible (D) is your differentiator. The market today is so hyper competitive that you find an attribute to differentiate and your competitors find it very relevant and desirable for their customer segment, they will copy the same in no time. Bigger organizations have much bigger marketing muscle and budget, and they will get to all of the market much faster than you think you can. Today in this hyper-connected and in the hyper-competition world, your competitors are watching you like hawks very closely than you think. Yes there will be an advantage of early mover but again depends on much marketing muscle you have to inform the market that you are the early mover. Also early mover advantage does not last long. Hence it comes back to the same question on how defensible is your differentiator is. Google’s page ranking or the original formula of Coke or may be the market share or the distribution arm of HUL has in India etc. that you have but others don’t have and cannot be easily copied – can be a measure of how defensible is your differentiation is. Coming back to our toothpaste example, assume for a minute that the formula that makes tooth paste sugar free is patented or something only you know and others cannot replicate easily, becomes very defensible now.
Along with this RDSquare test, I also like to introduce another measuring attribute called the “Size of the market” (S) and I feel is also really critical. Assume you have a great differentiation, very relevant to your segment of customers and also very desirable but the size of the segmented market you have chosen is very small. The whole idea of entering the market with this product becomes unviable and not worth investing or creating a product for that market. Let’s consider the same example of sugar free tooth paste and in a country where there is less than 1% population of diabetics. The whole idea of selling that product becomes unviable as the market is very small and will never be profitable or scalable either.
Together I call this the D3RS test or better “d-cubers test” of differentiation. Also I wish there was a way we can measure (say on a scale of 1 to 10) all these attributes D,D,D,R & S and a cumulative measure which says how strong the differentiation is.
So I guess make a list of all attributes of your product differentiation and see which one can pass the d-cubers test 🙂