30. The Law of Differentiation

The Laws of Business Success

Under the Laws of Business

A product or service must have a competitive advantage or an area of excellence that enables it to stand out from its competitors in some way if it is to succeed in a competitive marketplace.

Your product or service must be unique, better, or even outstanding in some way if you are going to sell it in sufficient quantities to be successful. It cannot be a "me too" product. It has to have special strengths or qualities that make it different from any of the other products or services that compete with it or that can
be used as a substitute for it.

The first corollary of the Law of Differentiation is
The determination of a unique selling proposition (USP) is the starting point of all successful advertising and sales.

A company should be able to summarize what makes its product or service unique and better in twenty-five words or less. Ford says, "Quality Is Job One." BMW calls its cars "The Ultimate Driving Machine." IBM bases its advertising and marketing on "Quality and Customer Service." Nordstrom is famous, and highly profitable, because of its reputation for "Service." Coca-Cola is "The Real Thing." These advantages convey clearly why someone should choose these companies over a competitor.

The very best marketing, advertising, and selling campaigns are built around a unique selling proposition that can be communicated in a meaningful way to the prospective customer. What is yours?

The second corollary of the Law of Differentiation is
To succeed in the marketplace, a product or service must have a distinct advantage, something that makes it superior to competing products and services.

The determination of your competitive advantage for your product or service is perhaps the most important single marketing and selling decision your company makes. Weakness in this area is the biggest single reason for market failure for any product or service.

Whether the product is a national newspaper, like USA Today, which lost several hundred million dollars before it eventually pulled into the black, or a candidate for political office, the advertisers must create a meaningful competitive advantage that gives the prospective customer a good reason to buy that product rather than buying something else.

Jack Welch, CEO of General Electric, has said that his philosophy is to be either number one or number two in every product area in which General Electric competes. If General Electric cannot achieve the first or second position within a reasonable time period, it will withdraw from the market and focus its resources in another area where it can dominate. He says, "If you don’t have competitive advantage, don’t compete."

The success of Internet companies such as Amazon, America Online, Yahoo, eBay, Priceline, and others is due to large numbers of customers perceiving these sites to be superior in design and features to other sites that offer similar services and products.

Your area of excellence, or competitive advantage, can change over time in response to changing market conditions. When market tastes or demands change, you must change as well.

For example, for many years, local restaurants competed on the basis of good food, reasonable prices, and convenient locations. Most still do today. Then, along came young Tom Monahagn in East Lansing, Michigan, with an idea to premake a selection of the most popular pizzas so they could be baked and delivered within a certain geographical area within thirty minutes. Domino’s Pizza was born.

There are now several thousand Domino’s Pizza restaurants worldwide and Tom Monahagn is a billionaire. He selected an area of competitive advantage, that of speed in the delivery of a popular and inexpensive food, and redefined his industry.

How you can apply this law immediately:

1. Define your competitive advantage in one sentence. In what way is your product or service superior to that of your competitors? What makes you special? Write your answer in such simple terms that an intelligent child can understand it and repeat it back to you.

2. Decide today to develop and promote a competitive advantage of some kind, if you don’t currently have one. What could it be? What should it be? With the way your market is changing, what will it have to be in the future? Ask your customers what they like best about what you sell them or do for them. This is usually what they perceive to be your competitive difference. Why do they buy from you rather than from your competitors?

Source: Brian Tracy, The 100 Absolutely Unbreakable Laws of Business Success, Berrett-Koehler Publishers, Inc, (San Francisco, 2000).