In mature markets, differentiation on a product level is not easy to achieve. However, there is a lot of differentiation potential in the context of how you engage with your customers, in the ability to build relationships and evaluate customer needs, and finally in how you combine and deliver products and services to develop a solution which addresses customer needs and delivers the expected business outcomes.
A strong value proposition message is relevant to customers, has quantified value and is uniquely differentiating. If your value proposition doesn’t differentiate, you are at risk of a price war with your competitors.
But can you find the “favorable points of difference” of your product or service (aka your solution) to answer a customer's question: Why should we choose your offer instead of your competitor's?
In common terms, "A solution is a product, combination of products, services, or a mix of products and services (…) provided to address the client's specific business problem.
This definition is already a good starting point for a high level assessment of the competitive positioning of your offering (e.g. product or combination of products and services). It is necessary to break down into details as far as required to find distinctive and favorable points of difference for your offering.
The assessment process typically includes the following steps:
- Define evaluation criteria, scoring scale and weighting criteria (What to compare?)
- Collect required data and information (for example, the source can be technical documentation such as installation guide and other technical documents and manuals published by vendors)
- Build consistent comparison matrix (How to compare?)
- Analyze collected data and identify advantages and disadvantages of your offering
A simplified, high level competitive comparison matrix (which doesn't use a numeric score system) may looks as follows:
Table 1. Simplified competitive product comparison (gap assessment)
Color coding: Depending on the definition, green may signal that a given feature set is available, yellow may signal that the features are partially available (for example thru 3rd party integration) while red may signal that the defined features set is not available. However the criteria can be defined in many different ways and so the colors coding meaning.
"Vendor 2" in our example has a clear advantage in context of the features set #1, also it covers feature sets #2 and #3, and thus the result of the analysis is that Vendor 2 offer the most comprehensive solution.
There are endless variations possible for what and how to compare products. Gartner, IDC , Forrester, KeyPoint Intelligence (to name a few of the top industry analysts) provide various assessments of products and offerings in a variety of market segments. Eventually these analysts identify strong differentiation points for your offering, but if your company or your offering isn't on their radar, you need to do some homework on your own if you want to understand your competitive positioning in the market and to develop a strong value proposition message.
However, the assessment of the offering portfolio is just the first of several areas of research you need to complete. What counts is not only WHAT you offer but also HOW you implement your sales or channel strategy, including the scoping and delivery process, as well as WHO you are (your corporate identity and strategy).
Large organizations and companies often outline publicly their vendor selection criteria. For example, Credit Suisse says that the company “… wants to work with suppliers who share our values to deliver excellent services to our clients. We establish and maintain relationships with small local and large international suppliers, selected on merit.
In an outsourcing RFP (Request for Proposal), T-Mobile UK said the following about their final short listed vendors”, All 3 short listed providers were qualified to provide the required level of service to T-Mobile UK. Winner was selected based on consistency of performance as well as key cultural, compatibility and commercial differentiators that best aligned to T-Mobile UK’s goals 
Public sector customers such as The Scottish Government (which spends more than £11 billion a year buying goods, services and works) calls out specific ethical selection criteria such as Fair Work practices. The agency says: “Careful consideration, for example, must be given to whether it is relevant and proportionate to address Fair Work practices as selection criteria. It may be more appropriate to include Fair Work practices in the award criteria, which encourages bidders to explain how any existing and any new Fair Work practices they propose to adopt, will positively impact on the way the contract is performed.
We see now, that the supplier´s characteristics (= the WHO) and the relationship between the supplier and the customer plays a very important role in the buying process, not only WHAT is being offered and HOW it´s being offered.
Further selection criteria for the Vendor may include the following (not exhaustive list):
- Economic or Financial Standing
- Technical or Professional Capability
- Business Continuity and Disaster Recovery
- Quality Management
The assessment process is the same as outlined above in the context of product / offering comparison and starts with a clear definition of WHAT to compare, definition of criteria, weighting etc.
Building a complex measure systems for each element of offering, delivery process and other parameters may end up with a complex matrix, as illustrated in Figure 2 below. The key challenge is to build a consistent metrical comparison system for all measured parameters.
Figure 2. Competitive comparison matrix aggregating different parameters
The visualization needs to be carefully selected. The above spider diagram is proper, when some distinctive points of differentiation have been identified.
Information sources are as follow:
- Interviews (for example with sales teams, customers)
- Assessment of competitive job postings and announcements
- Social Media postings
- Lost/won deal review
Critically evaluate the claims of your competitors. For example, if your competitors claim "global reach" as a differentiator and you have just limited presence around the world, check critically what "global reach" really means in the specific customer case. If the customer provided a dedicated list of countries where it wants to receive services, a "global reach" plays no role in that specific deal, as you need to be able to deliver in the countries as defined by the customer. Anyway, "global reach" is just one of many marketing buzzwords which almost any large company uses and thus practically not really a differentiator at all. Further, try to specify what "global reach" means. Is there a threshold defined by a number of countries where companies provide their product and services to differentiate between a local, regional and a global vendor? Would you call company global if it operates in more than 10, 30, ....or maybe 50 countries? Difficult to say, isn't it? Apply this method to other differentiation claims of your competitors.
In the mature markets, differentiation on product level is not easy to achieve; however there is a lot of differentiation potential in the context of how you engage with your customers, in the ability to build relationship and evaluate customer needs, and finally in how you combine and deliver different products in a solution which addresses customer needs and deliver the expected business outcomes.
 See Customer Value Propositions in Business Markets, Harvard Business Review March 2006
 Managing the vendor selection process, Tim Spence, Head of Customer Finance, T-Mobile UK , October 2009
Opinions or points of view expressed in this article represent the personal position of the author. This document does not constitute professional advice. The information in this document has been obtained or derived from sources believed by the author to be reliable but I don’t represent that this information is accurate or complete. Any opinions or estimates contained in this document represent a judgment at this time and are subject to change without notice