Product Differentiation by Innovation: Strategies and Tactics Explained

Ways you can innovate and make your digital products stand out.

Thanks to the pandemic, digital consumers are here to stay. Everything from household supplies, groceries, clothing, medicine, to jewelry, cosmetics, entertainment and other categories — all can be delivered to you by shopping online.

These consumer habits combined with the expanding frontiers of the world wide web (WWW), have inspired development of products and services for near everything imaginable. For creators, building the next successful digital product is their pathway to “manifest destiny” like they were back in the 1800s during the USA Westward Expansion. Only now, the federal census today couldn’t declare this “WWW frontier” closed.

Unlike land, the internet is continuously expanding, and as long as there is demand, we will see more consumer activity and more digital products striving to get a lion’s share of the market. But if more and more products are being made, and it’s no secret that many products on the WWW provide similar services — how can you ensure your products and services stand out? It’s time to rethink your approach to getting the lion’s share.

Differentiation by Innovation

Don’t strive for the majority share of a market, because it’s too hard to build a remarkable product to sell to anyone and everyone. Even if you could build a comparable product, you couldn’t make a substantial profit because it wouldn’t be unique, and you will compromise on price at the cost of your time and resources just to make sales. It would be a “me too” product.

Instead, strive for the most profitable share of your market. That means:

To make this happen — requires a combination of strategies and tactics for differentiation by innovation.

When I say “strategies”, “tactics”, “differentiation” and “innovation”, these are ways of saying:

To help you to build innovative products that make consumers see you as unique — here are five strategies and tactics you can use:

1. Customer Development

If you want your product to stand out, the kinds of consumers you cater to need to stand out as well. They need to stand out so much, they become your advocates and cheerleaders. That’s why word of mouth is the best form of marketing and promotion.

Think of it this way — what do you call a person who buys an iPhone or an iMac or Apple Watch? We call them an “Apple Person” or an “Apple Fanatic”. Even if it’s said as a joke, the fact that consumers of Apple products are described this way is the best kind of marketing Apple can have, and it doesn’t cost Apple anything. Apple people are loyal consumers. Don’t you want to attract that kind of person to your brand?

So how do you figure out who is your “Apple Person”? You start by doing customer development:

Customer development is a four-step framework, originally identified by Steve Blank, to discover and validate that you have identified a need(s) that customers have, built the right product to satisfy that customer’s need(s), tested the correct methods for acquiring and converting customers, and deployed the right resources in the organization to meet the demand for the product. Source: Agile Alliance

Think of customer development like how you would want to get to know a person you’re attracted to. Customer development is like building a courtship and then you get married. You don’t just want a consumer to use your product once and walk away. You want them to partner with you and become a loyal consumer — because you as a product business have what they want, and they feel satisfied and appreciated because of the service you provide. To perform good customer development, try the following:

Use the Lean Startup approach mixed with Customer Development and Agile Development methods.

Tactics

2. Brand and Customer Experience (BX + CX)

I know you want to sell your product, but have you considered that positioning and selling your brand can make you profitable as well? Take a look at the business “Walmart” for example.

Walmart is a great grocery business and they are known for their huge inventory and low prices, which is good; but Amazon is the more attractive online business in light of all their products and innovations. Some people even forget that Walmart has an online business.

In the eyes of online consumers, Amazon is the more attractive brand, and the only way Walmart can respond is to differentiate themselves and devise novel ways to show why consumers should buy online from Walmart.

Getting the brand and customer experience (BX + CX) right is the first step in getting consumers to notice and be drawn to you. It’s the start of the potential courtship and hopefully the partnership. To get consumers attention with your brand requires confidence, so you have to design confidence into your BX and CX. This means — your product name, logo, product and service design all need to evoke confidence.

Your brand also creates a sense of power and prestige when it’s designed right. Just look at brands ranging from Airbnb, Sony, Samsung, Apple, Netflix, Disney… consumers pay to use their products because of the prestige that comes with it.

Engaging with these brands says something special about the consumer. It’s one of the reasons why they are willing to buy your product. All these brands have competition, but the before mentioned have proven that consumers find value not only in your products, but in your brand power.

That’s why delight, simplicity and quality are key when designing a great product name, logo, tagline, website, and every property and touchpoint consumers interact with. It’s like what the fashion company Uniqlo speaks about in regard to their products — “Always be basic, but never boring.”

For your brand to stand out among the competition, everything about it needs to say to consumers:

1. “I am very good at what I do.”

2. “I know what I am very good at,” and

3. “I am not trying to be anything else.”

Remember when I said that the kinds of consumers you cater to need to stand out as well? Your brand is the first example of what you’re saying about yourself and what you stand for, and if consumers are buying your products — it means that they like what they see, and they see themselves with your brand i.e. they are attracted to you.

So when it comes to designing your brand — what do you see within yourself as a business? What do you believe your consumers love and want when they buy your products? To answer these questions, try the following:

For all BX and CX touchpoints (digital, physical, visual, audio, text), strive to create novel, straightforward, succinct and clear communication that portrays what your business and/or product provides.

Tactics

3. User Interface and User Experience (UI + UX)

It’s no secret — the UI/UX of Amazon.com is not perfect, but it doesn’t need to be. That’s impossible. But what their UI/UX made possible is something no other business did before. They made it possible for consumers to buy items online with one click.

Amazon even had a “1-Click patent” from 1999 to 2017. During that time, Apple licensed the patent to use the technology in iTunes. It proves that if you design innovative UI/UX, you can make your product stand out and attract unlikely consumers who see value in what you’ve created.

Design UI/UX interactions and flows that are clean, quick, smooth, consistent, and accessible. In moments where it’s impossible, provide tools and/or content to mitigate pain points. Where the UI/UX falls short, make up for the shortfall with good customer service. The more hassle-free the overall experience, the higher the probability of conversions.

Tactics

4. Messaging and Storytelling

When it comes to marketing, advertising and packaging — you want to be able to tell consumers what your product can do. But you also want to tell consumers what the product will enable them to do if they have it in hand.

These two messages may sound similar, but they are quite different in reality. It’s the difference between saying, “The iPhone can store over 1000 songs,” and “With the iPhone, you can have 1000 songs in your pocket that you can listen to, anytime and anywhere.” That’s the power of good storytelling. To make this possible, just try the following:

Use experiences shared by people who have expressed the kinds of problems you’re striving to solve with your product, and work on how you could incorporate these experiences with your product idea and generate various forms of narrative prose.

Tactics

5. Prices and Feature Lists

Offering the lowest price does not mean your product will be a success, especially if you’re not making a substantial profit. Sales alone is not enough, because it doesn’t guarantee sustainable growth.

You still need profit in order to invest in resources, R&D, and manage expenses with minimum need for bank overdrafts and credit; And you can’t rely on outside investment or venture capital forever. This is why making your profit margins as high as possible is critical.

It is true, there are many products out there that offer freemium pricing, but for businesses that provide it, they incur a cost. Whether you offer your product for free or for a discount, from an accounting standpoint, it’s a business expense, which means that it eats into your profit.

The popular rationale for freemium is that it encourages consumers to sign up, so if you’re willing to spend a portion of your profit and budget on building a user base — then be very careful about which features you decide to offer in your freemium package.

If you offer a package that encourages many to sign up, but not enough convert to premium accounts — then you’ve offered too much and you’ll go out of business in the long run. If not enough consumers sign up for freemium, but more sign up for premium, then you’re not building a large enough user base fast enough. Going with a freemium strategy is obviously a risk so you’ll have to strike the right balance to ensure that your premium priced packages are preferably profitable — alliteration intended.

Regardless of the strategy, to set sustainable prices mean you need to provide genuine value; And in a market filled with comparable products, your best strategy, other than building a product that is ten to one hundred times better than the others — is to differentiate by providing in your product, different lists of features for different price points.

Establish prices that are not only acceptable to consumers, but also ensure that you can grow your consumer base, product lines, grow your business, and be able to sustain your business during unexpected challenging economic periods, like a recession or pandemic for example.

Tactics

Innovation is About Imagination

If you’re wondering about how you’re going to use all the results and data from applying the strategies and tactics, let’s talk about the one thing that can empower you to weave all the right insights together like a tapestry — your imagination.

Notice I say imagination, not creativity. While both imagination and creativity are good — there is a difference. With creativity, the end result can still be something that has been done before. With imagination, that requires vision and the will to create something never seen before… and that is attractive to people, because it’s different.

So when you design your product to stand out, don’t just do the conventional and draw your ideas and techniques from the world of business and technology. Explore the worlds of engineering, architecture, science, law, nature, psychology, chemistry, biology, art, humanities, philosophy, history, poetry, literature, music, entertainment, fashion, filmmaking, religion, mythology, love… sex.

Pay attention to all the stories, visuals, sounds, feelings, messages, metaphors, and symbolism in these worlds; and most importantly in my opinion — pay attention to how all these worlds are interrelated in deep and complex ways — like weaving a tapestry.

Pay attention to how everything in these worlds exist and make people feel. Imagine about how everything could be applied to the design of your product. Imagine how you could infuse the qualities of these things into your product. The goal is not just to make a product that’s good… but to also make people feel great about your product in ways competitors do not.

Remember, the objectives are to:

“Within my product design, in what ways can I make changes, or improvements, or new ways of doing things?”

With your answers — get creative and use your imagination. Explore, design, build, test, learn, iterate… and imagine. Your “innovations” will emerge from your breakthroughs, and you use the breakthroughs to create differentiators in your product.

Differentiation is About Authenticity

If you’re serious about building a truly profitable digital product, then you also have to be serious about cultivating a genuine business identity and loyal consumer base.

To accomplish all of that requires above all else — authenticity.

You have to be true to how and why your product is unlike the competition. It’s either you’re authentic, or you’re just like every other product scrambling for the attention of any consumer or investor with a budget.

Take a look at every company that is regarded as highly successful. Do you think that when they started, they spent the majority of their time scrambling for low hanging fruit in market share?

Companies like Amazon, Netflix, Google, Tesla and Apple are not seen as “me too” businesses — because they don’t spend the majority of their resources scrambling for pieces of pies that already exist. Instead, they focus on the design of their own pies by:

What these companies have in common is the commitment to work with real people towards doing good customer development, product discovery and design. Companies that continuously design with real people — that’s what makes their digital products different and stand out; And that attracts loyal consumers. That’s the power of innovation.