- 3.4 -

Differentiation and uniqueness

A huge factor in a brilliant idea is its degree of differentiation. Out of strong differentiation comes the uniqueness that is the hallmark of a brilliant idea.

Price can be a differentiator, but should definitely not be the only one.

One common way to differentiate yourself from competitors is to price your offering lower than their comparable offerings. This can be a useful strategy for new start-ups, at least for a time. Established companies will not be too keen to lower their prices; they have fixed costs they must meet, and often only a narrow profit margin. They may lower prices for a limited time, though, as a way to retain existing customers and attract new ones.

A truly huge company may decide to drop prices so low that they drive you rapidly out of business. If they have sufficient resources to absorb the losses for long enough to wipe you out, they may decide it’s worthwhile to do so. Do your homework in advance and be aware of this as a possibility.

If your offering is truly high-quality and high-value, price should be only one part of your customer acquisition strategy. The more you differentiate yourself from your competitors, and the greater your perceived value becomes, the higher you can raise your prices – up to a point. At least you have more choice in the matter of the prices you charge.

Trying to compete by undercutting competitor prices alone is a dead-end proposition. By doing so you eventually wipe out any profit margin, and any possible appeal to investors. The conclusion is that you have to differentiate your products, services, and your business model on more than just price to have a successful strategy.

Share this