Differentiation matters way more than you realize.
It used to mean product differentiation, but it doesn’t any more.
Today, you need to find differentiation somewhere else, and we’re going to tell you where in a minute.
But first, if you don’t know a ton about differentiation, let’s catch you up with a Coles Notes version:
In Michael Porter’s seminal book, Competitive Strategy, he says there are three generic competitive strategies: cost leadership, focus, and differentiation.
Cost leadership means you use large economies of scale to your advantage.
Companies like WalMart and Amazon work this strategy into everything they do.
It’s a major part of why they’re so profitable.
Unfortunately, being a ginormous company and reaping the rewards of your size probably isn’t in the cards for you.
At the other end of the spectrum, you can use focus to set your company apart.
But that strategy limits you to a hyper-targeted niche, which doesn’t suit most companies.
Most of us like having the option to pursue new business lines.
That brings us to differentiation.
In Competitive Strategy, Porter points out that a company can differentiate itself using parts of its value chain that have nothing to do with its product.
The value chain is any way in which you add value to your customer.
Think production, marketing, distribution, and after-sales service.
Product differentiation alone doesn’t cut it anymore.
That’s because every tech category — in fact, every industry — is exploding with competition, so product differentiation is a lot tougher than it used to be.
Your buyers can’t tell the difference anymore between you and the competition.
They’re like a stranger seeing identical twins for the first time. They can’t tell the two apart.
What does that mean for your company?
You need to look to other sources of differentiation in the rest of your value chain.
Most companies have done a pretty good job of that, especially in streamlining things like production and distribution.
Many have decent marketing metrics and processes too.
Know where they’re ignoring differentiation-based wins?
In sales conversations.
Sales conversations are key to differentiation
Sales calls are an untapped way to differentiate yourself.
Why?
Because having an outstanding product and decent sales conversations means you’re at parity with your competition.
Having a decent product and outstanding sales conversations means you’re killing it.
Two weeks ago, I spoke with a VP Sales who told a story that illustrates this perfectly.
He works at a company with a top-notch product that’s truly unique in the market.
But he recently heard a prospect — who he lost to the competition — say, “I’ve never seen two products look more identical.”
He was blown away. In his mind, the products couldn’t be more different.
Didn’t matter.
To the buyer, they were the same.
And that’s on the sales team. Not the product team.
On the other hand, I know a VP Sales who — objectively speaking — sells a slightly inferior product compared to his competition.
And he’s dominating them.
How?
His competitors are selling products and benefits.
But he’s asking about his customers’ strategic priorities and then framing his product as a linchpin in helping them reach their objectives.
In other words, his competitors lead with their product, and he’s leading prospects to his product.
I can’t state emphatically enough that how you sell is as important as what you sell.
Possibly more.
Zuora case study
Let’s take a quick look at a case study that illustrates my point.
Zuora is a SaaS company that uses sales conversations to differentiate itself really well.
Zuora has a great product, and still figured out that how its team sells is as important as what they sell.
They have roughly 12 competitors.
Yet they’re ringing in an estimated 7x the revenue of their closest competitor.
How is that happening?
They didn’t start earlier than the competition, so there’s no first mover advantage.
Maybe they have great marketing.
Sure, maybe.
Except that their competition is outperforming them in several areas of marketing.
How do I know?
Look at their search engine rankings compared to their competitors:
The point is, Zuora’s success relies heavily on having one of the most effective sales presentations in the world.
They start their pitch by introducing a critical change happening right now:
“People aren’t buying products anymore. They’re subscribing to them.”
They walk prospects through this trend’s consequences, outlining in gory detail how some companies fail to adapt and pay the price.
… And how others are winning by offering subscription-based products and services:
Image taken from the Gong.io Blog
They introduce their product after they’ve told that story.
In short, they aren’t succeeding because of what they sell, though their solid product helps.
They are killing it because of how they sell, and their prospects are buying in droves.
What can you do to gain a competitive advantage during your sales conversations?
Use the sales calls themselves as your differentiator.
Here’s how:
Assume you’re going up against the competition in every deal.
Create a repeatable strategy to help you deal with that assumption.
Show your sales team how to conduct an initial meeting that blocks out the competition.
Do that by talking to your buyer about a problem they have that only you can solve.
If you’re competing in a mature market, get the marketing team on board with the problem you’re trying to sell.
Their work can help deflate the competition before your prospect even enters the sales cycle:
Image taken from the Gong.io Blog
It’s their job to wage that initial battle.
If they fail to preempt the competition, your sales calls become your company’s last stand.
Buyers in mature markets are category aware. They’ve seen everyone’s marketing material and are usually well informed.
If they still don’t know why they should pick you, you need to bring them back to a problem only you can solve.
Your opportunity to do that happens in the middle of the sales cycle when your prospect picks apart your technology:
Image taken from the Gong.io Blog
That’s when you can influence them by helping them see how you’re different from everyone else.
Do it now, while they’re paying attention to your product’s technical specs.
Even if they sound critical, having your prospect’s attention is a golden opportunity to explain how you alone can solve their problems.
Nail this and they’ll reward you with their business.
That’s why it’s often easier to sell in established markets to prospects who already understand the category.
If you’re selling in new markets, things work a little differently.
You have to block out the competition early in the sales cycle.
Get the competition wideout in the open. Raise it. Discuss it. With gusto.
Even if that seems counterintuitive, talking about your competition at the beginning of the sales cycle correlates with a 24% higher likelihood of closing the deal compared to not discussing them at all:
Image taken from the Gong.io Blog
How do you do that? Through positioning.
What is positioning?
I want you to take your conversation down a carefully cultivated path by doing three things:
Educate the prospect about the problem you are uniquely positioned to solve.
Explain your company, its background, and where you sit compared to the competition.
Clarify your market category and where you fit in.
If you cover these topics, you’ll be well positioned in your prospect’s mind, and the rest of the process will flow much more smoothly.
In fact, data shows that if you embrace positioning, you’ll win more competitive deals than your peers.
The top sales people spend 58% more time on positioning-related topics than those who lose deals:
Image taken from the Gong.io Blog
And there’s a little bonus.
All this positioning work helps you avoid pricing wars at the end of your sales cycle:
Image taken from the Gong.io Blog
You can see how all of that adds up to an outstanding sales conversation.
One that truly separates you from the competition.
Get the competitive advantage
Sales conversations are the last battleground of competitive differentiation.
When everything looks the same to your customers, great sales conversations are what will separate you from your competition.
