Read Time: 5 minute(s)

If you don’t stand out from your competitors in some meaningful way, your business won’t survive for long. In this video taken from the Ecommerce Growth Engine, Learn why having a business differentiation strategy is so important, and a step-by-step approach to creating your own unique value proposition.

**Templates Mentioned in Video**

Growth Plan: https://bit.ly/3MxOD17

Understanding Strategic Business Differentiation

Differentiation is the process of distinguishing your business from competitors by meeting one or more of the core driving needs of your target customers better than the competition. This unique value proposition (UVP) gives your business a competitive advantage and increases the chances of customers choosing your products or services over others.

The Two-Step Process to Developing a Unique Value Proposition

Step 1: Identify the core driving needs of your target customers

To effectively differentiate your business, it is crucial to understand the core driving needs of your target market. You should consider four categories of needs:

1. Functional needs: These refer to the performance and utility of your product or service. Some examples include ease of use, durability, efficiency, or important feature sets.
2. Emotional needs: These relate to how your product or service makes a customer feel. Emotional needs may include feelings of confidence, happiness, security, or a sense of belonging. A strong brand identity combined with storytelling can often help evoke emotions in customers.
3. Economic needs: These pertain to the financial aspects of your product or service. Customers are often concerned with the cost, value for money, or potential return on investment. Offering competitive pricing, discounts, or bundling options can address economic needs.
4. Experience needs: These focus on the customer journey – from discovery to purchase and after-sales support. Experience needs might include user-friendly website navigation, responsive customer service, or personalised recommendations.

To identify your target customers’ core driving needs, list all the possible needs for each category and then highlight the most critical ones. These driving needs are the key factors that influence customers’ purchase decisions. If you don’t already know which needs are most important to your customers, you could send a survey to your best customers to find out. This should be done before moving onto the next step.

Step 2: Select your differentiation strategy

Once you have identified the core driving needs of your target customers, the next step is to develop a differentiation strategy by deciding which needs you can meet better than the competition. This will help set your business apart from others in the market. Here are some tips to guide you:

1. Analyse your competition: Research your competitors and identify their strengths and weaknesses. This will help you spot gaps in the market or areas where you can excel in comparison.
2. Assess your unique strength: Identify the unique aspects of your business you can leverage to meet your customers’ driving needs. These might include your expertise, supply chain, technology, or partnerships.
3. Focus on one or two driving needs: Choose one or two driving needs to differentiate your business. By narrowing your focus, you can devote more resources and attention to meeting these needs better than anyone.
4. Ensure your differentiation is sustainable: Your differentiation strategy should be difficult for competitors to replicate or surpass. Can you build an ecomonomic moat around your business? This will help maintain your competitive advantage in the long run.
5. Communicate your differentiation: Clearly articulate your unique value proposition to your target customers through marketing and branding efforts. Your UVP should be communicated at every stage of your marketing funnel and on every platform – your website, your Google Ads, your social media, your email newsletter etc. This will help customers understand why they should choose your products or services over others.

By following this two-step process of identifying the core driving needs of your target customers and selecting a differentiation strategy, you can create a unique value proposition that sets your business apart from the competition and increases the likelihood of customers choosing your products or services.

Legitimising Your Business Differentiation Claims

To make your differentiation claims compelling, provide objective, measurable data or reasoning to support them. This can include research studies, case studies, testimonials, unique qualifications, or experience. A powerful example of legitimacy is offering a guarantee – such as a delivery guarantee or a quality guarantee – that puts your money where your mouth is.

Examples of Successful Differentiation:

* Features: a sock company. Offers a lifetime guarantee for its products – showcasing its confidence in their durability and quality.

* Patagonia: an outdoor clothing brand. Has an ironclad lifetime guarantee that builds trust and loyalty among customers while staying true to its eco-friendly values.

* Atolla: an AI-powered skincare brand. Offers a money-back guarantee on first purchases, demonstrating confidence in its customised beauty serums.

Developing a Unique Value Proposition for Your Own Business

With these examples in mind, it’s time to apply this to your own business. Here are the Key Actions to Take:

1. List the needs of your target customers in the growth plan template.
2. Underline or highlight the most critical driving needs.
3. Decide which one or two driving needs you can meet better than the competition.
4. Consider what tangible evidence can justify your differentiation claims and write it into your growth plan template.
5. Develop a plan for how you will communicate these key differences to your customers.

Differentiating your e-commerce business is essential for growth and success. By identifying the core driving needs of your target customers and focusing on meeting those needs better than the competition, you can create a unique value proposition that sets your business apart. Remember to provide tangible evidence to legitimise your claims and continuously work on refining your differentiation strategy.

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