Differentiation Examples

I love South Africa but hate the ten or eleven hour flight. We’d also love to visit Australia and New Zealand but that’s more than twice as bad.

I was interested to read that Air New Zealand have introduced a new way for economy class passengers to travel in economy class.

It’s called Skycoach and is available on the  Boeing 777-300ER.

It turns the window, middle and aisle seats into a single space which the airline calls a couch designed for two. The armrests are stowed away and the leg-rests rise to fill the foot-wells to create what you might think of as a flat-bed (except that it’s a little narrower than the luxury beds at the front of the plane.)

It’s a tight squeeze for two people to cuddle up.

I’m not sure it’s right for me – I’m just too big (but it’s not the time for me to rant about size-ist policies).

But I do think it’s a creative solution to an irritating problem and I wish Air New Zealand well with it.

I’d say that this is differentiation by how.

You’re still flying from A to B and arriving at the same time so the basic service is the same. But how you are doing it is that bit different and hopefully more comfortable.

Buying usually involves taking a risk so if you can again a trust advantage, it can be enough to tip the balance from not buying to buying.

Recent research by Li Huang and J. Keith Murnighan published in What’s in a Name? Subliminally Activating Trusting Behavior (Organizational Behavior and Human Decision Processes, vol. 111, no. 1) finds that trust can be gained from the people you are associated with.

This is an example of differentiation by who.

It seems that the process of trust often starts early and the names of associates is a form of shortcut decision-making. It saves the time and trouble about having to do our own due diligence.

And unfortunately it is this factor which leads to financial disasters like Bernie Madoff and his enormous Ponzi scheme. The fact that his family and friends were among the investors encouraged others to trust enough to commit large amounts of their own money to his fund.

Obviously I’m not saying you should use this trust factor to rip customers off but who you are seen to associate with and who recommends you can be a powerful differentiator. It shouldn’t be abused.

For more information on these ideas see Building Trust Through Subliminal Cues

Last week a new doughnut shop launched in Cardiff and more than 1,000 people queued up with some waiting for more than two hours.

That’s pretty impressive but Krispy Kreme doughnuts don’t just have a bit of strawberry jam in the middle but exciting varieties like lemon meringue pie and coffee kreme. This is differentiation by what – the product is unique and not available anywhere else. It also appeals to the senses of sight, taste and smell as another form of answering the question “how can we be different?”

To put this queue into perspective, it was twice the number who queued up to buy the new Apple iPad 2 and you know what devoted fans Apple creates.

Krispy Kreme doughnuts are very expensive and like Starbucks, proves that for the right kind of customer experience, buyers are prepared to pay much more.

According to one survey 60% of British holidays makers have been ripped off by a tourist trap restaurant with bad food, bad service and a lousy experience. I am amazed it’s not more and I think it shows the low level of expectations we have.

I’m not encouraging it as a way to make money (because I believe in the value of happy customers who come back to buy again) but I do think it’s an interesting model.

First it is “differentiation by where”.

The attraction is a convenient location in a high traffic area popular with tourists (i.e. naive customers who don’t have the knowledge and experience of buying regularly).

If you’ve been to any popular tourist destination, you’ll see the restaurants lined up one next to another.

Each is possibly a tourist trap restaurant compared to those in the back-streets which, if they are good, will be full of locals.

Of course individually the tourist trap restaurants aren’t differentiated by location but often they are so busy, they don’t need to be. One can be as mediocre as the next.

Imagine you run such a business.

You’re selling to customers who won’t be around for long, with little local knowledge and what they have is based on comparing restaurants in the same location.

Prices are visible.

Popularity is visible – and low price may attract while high price repels.

Food quality and service is not visible – the tourists are on holiday and want to have a good time and cheapish plonk may have dulled their senses.

You’ve got a choice.

Pay more the ingredients, take longer to cook them with care and hire more, nice waiters – the result is that you have higher costs than your competitors.

Or cut back on the quality of ingredients and take little time or trouble on the preparation- and have lower costs and better profit margins.

Unfortunately the tourist trap model of profits makes economic sense which is why it prospers.

Partly the problem is the tourists themselves who go to these restaurants. They can be described as convenience buyers – not particularly interested in the quality of the experience or the price. They just want to have a meal and get on with their holiday – and eating in front of a famous landmark or site gives them something to remember, even if the food is lousy. And most won’t complain.

It doesn’t have to be like that.

Last April we had seven nights in Majorca staying B&B at a nice hotel.

The first night, tired from our journey, we ate at the hotel – and sadly it can only be classed as a tourist trap.

The price was reasonable but the food and the atmosphere left a lot to be desired.

Next day we took to the back-streets, reading every menu we could find.

And we found two good places.

One close to the hotel and one a long walk away but it was along the seafront and past the shops so it was an interesting jaunt.

We ate at the first place, two nights and at the other three nights. The food (at the restaurant that was the furthest away) was excellent and the atmosphere (inside or out) was great. In a week we became regulars, and we spent much more than we would have if we stayed at the hotel.

The place was always packed, with locals and people who visited the resort regularly with the odd lucky newcomer. It reaped the rewards of being exactly what it was – an excellent restaurant where the food and the experience mattered much more than the location.

The first (the one closest to the hotel and the strip of tourists trap restaurants) struggled. We gave a little inner cheer each time a new group came in but unfortunately it didn’t happy very often. The resort was quiet – it was the week after the Iceland volcano stopped flights in Northern Europe – and people weren’t being forced out of the convenience of eating in the tourist traps.

I understand the desire to avoid the tourist trap model of profits but this restaurant needed extra ways to increase awareness of it (flyers in the hotels, perhaps a free dessert offer if you buy a main course) or it needed a way to communicate the quality of the food (reviews or an imaginative menu in sexy food language – think Marks & Spencer’s  TV Food advertisements)

We tried one other place, a little Italian restaurant right by the sea but a little distance away from the main tourist trap restaurants. It looked nice but disappointed.

Is it just restaurants who can use the tourist trap model of profits?

No.

It’s open to any business which is:

• Selling to inexperienced customers with very limited knowledge of what’s available
• Selling to customers who are time pressed or lazy
• Selling products or services which cannot be judged before consumption

All you have to do is to be visible and price competitive. Convenience buyers will just buy what’s easiest.

Location works for tourist trap restaurants but regular promotion works for other businesses – and can even build up awareness of a brand which gradually becomes a preference (we like what we know).

Location doesn’t even have to be physical but on the Internet.

Sometimes it is better to get away from page one of Google – the seafront – to pages two and three – the back-streets.

Of course quality shouldn’t be terrible.

A really bad experience creates complaints and a lot of negative words on social media and the review websites.

Just disappointing.

It’s not the way I’d want to run my business – I like the model used by my three time visit restaurant in Majorca where I will definitely be returning if we got back to the resort. In fact, it’s a big reason to go back. Sadly I don’t expect the other place to survive.

But the tourist trap model of profit can be successful.

You have seen how many places serve indifferent, unimaginative food in popular locations for the proof to be before your own eyes.

What do you think?

If you think of a road-going sports car, what images come into your mind?

A red Ferrari, a yellow Lamborghini… even a Bugatti Veyron.

But I bet whatever car you think of has at least two seats.

Not so with the Briggs Automotive Company (BAC) Mono – it is the first single seat sports car to go on sale to the general public in Britain.

Think about it.

How many miles do you do on your own compared to carrying around one or more other people?

Now imagine the fun you can have if you take away all that size and weight.

That’s what the BAC Mono is all about.

I normally talk about differentiation by how much – this time it’s differentiation by how many – and is a great example of asking “why?”

“Why do we need two seats in a sports car?”

“Why compromise on the driver experience by pandering to a non-existent passenger?”

This way you can get a power to weight ratio of 540kg per tonne from a 2,300cc engine producing 280bhp.

And that means you roar from 0 to 60 in 2.8 seconds and in another mind-bending four seconds you could be doing a ton. If you keep your foot on the accelerator, you’ll get to about 170 mph although you’d be a braver man than me.

The BAC Mono is seriously fast.

And will it turn heads?

You bet it will.

I intend to focus on companies and brands which have secured a special place in markets and as it is about to pass its fortieth anniversary, Starbucks is a good place to start.

The first store opened in Seattle on March 30, 1971.

40 years later, over 17,000 locations in 55 countries and nearly $11 Billion of sales shows that there is something very special to turn the coffee house experience into such a big business with so many raving fans.

I don’t get it.

I’m told that people either love Starbucks or hate it.

I’m indifferent.

The coffee is OK if overpriced, I don’t understand the language so I’m not comfortable buying and I always find myself looking around wondering what all the converts see in Starbucks that I don’t.

The intention is to expand the Starbuck’s brand away from the coffee houses and into the supermarkets and away from coffee and towards other products too. It’s to become a lifestyle. I wish it luck but I suspect that it is a mistake.

Starbucks is in danger of losing its positioning in people’s minds – changes to the Starbucks logo.

It has successfully built up the brand as the third place – the one that is neither home or work. Again I don’t get it. In the UK, we have the pub and in Europe the pavement cafe bars which serve coffee and alcoholic drinks.

I believe Starbucks has benefited from the Friends TV show with Rachel, Monica, Phoebe, Ross, Chandler and Joey because they spent too much time in Central Perk. I’m even watching the repeats in the UK because I’ve decided that I hate the ongoing misery of Eastenders.

It looks warm, cosy, fun and friendly.

But that’s not how I feel when I very occasionally visit a Starbucks – usually if I’m meeting someone who is a fan.

There’s no denying the vast number of Starbucks fans and their passion for the brand.

Facebook has a Starbucks page with over 20 million people who have “liked” it. Mind you Facebook is another brand I don’t get and perhaps I should just accept that I’m an old fuddy-duddy.

The Starbucks following on Twitter is more modest, just 1.33 million.

Can you help? Let me know what you love or hate about Starbucks and what you think about the planned changes going forward.

It may be that I don’t have a very local Starbucks and therefore I don’t get the community feeling. There’s no denying that we all like to feel that we belong and the more you go and the more you see people you know, the stronger the feeling of community.

Differentiation Strategies in Use By Starbucks

1. Speciality coffee – in locations where there were already traditional cafes, Starbucks offered unique drinks
2. Funny language – you have to be one of the insiders to know what to get at Starbucks
3. Variety of seating – from coaches to armchairs to bar stools

If you want to know more about Starbucks, take a look at the Wikipedia entry.

“Where” is one of the 7 big questions of business success which helps to differentiate one business from another but it seems that it is being abused by some food producers.

It usually refers to where you are based which may pass on convenience advantages but it can also be a mark of quality. Think German cars, Swiss watches and French wine.

More than 30 per cent of food products claimed to be local, either weren’t local or couldn’t be proven to be local according to a Local Government Regulation investigation.

It found Somerset butter from Scotland, Welsh lamb from New Zealand and Devon ham from Denmark.

Full inspections revealed that at least 18 per cent of the claims were undoubtedly false with a further 14 per cent unable to be confirmed and therefore assumed false.

It seems that part of the problem is that there is no agreed definition of what local means so the local beef you see in restaurants or supermarkets could have come from much further away than you think.

I’ve not been well recently and that means that I’ve been watching too much daytime TV.

Still it’s given me a chance to catch up with the Batman of my childhood and the latest incarnation of Superman.

Sure both wear capes and their underpants over their tights but Batman and Superman are clearly differentiated so one isn’t a pale imitation of the other.

Try the three words test.

Think Batman and what do you get?

Robin? The batmobile? Gotham City? Cool technology in the bat cave?

Think Superman and you get different answers.

Lois Lane. Man of steel. Faster than a speeding bullet? Metropolis?

Batman is strangely vulnerable for a superhero but Superman is invincible unless the baddies know about Kryptonite.

Even their alter egos are different.

Bruce Wayne is a multi-millionaire benefactor while Clark Kent is a mild-mannered, meek news reporter.

And the baddies.

While Batman deals with the Joker, the Penguin and the Riddler, Superman battles with Lex Luther.

I’ve always preferred Superman but I think that’s because I’d rather spend my time with Lois than Robin.

Or what about Spider-Man?

While Batman chose to be a superhero and Superman was an alien sent to Earth, poor Peter Parker was bitten by a spider. Just a kid about Robin’s age, he is expected to do it all.

It’s not just superheroes on their own who have to be different to capture attention.

The Fantastic Four had different skills – Mr Fantastic with the stretchy body, Sue Storm who could make herself invisible, Johnny Storm as the human torch and Thing with enormous strength.

Or the X men with Wolverine, Storm, Cyclops etc.

It is the differences which make the superheroes interesting and create a connection.

If they were all super in every way, without flaws and vulnerabilities then they’d be much less popular.