A chain of Mexican restaurants in my neighborhood advertise by proclaiming it is the Mexican restaurants in the ugly green buildings. It has differentiated themselves from all other Mexican and other kinds of restaurants by being in ugly green buildings. Unfortunately, having ugly green buildings is of no value to their clientele. The buildings might be easy to spot as you're driving by, but being easy to spot is pretty far down the list of reasons you pick a place to have dinner. After you know where a restaurant is located, the reminder that you ate in an ugly green building will do little to prompt your return.
Their advertising dollars would be better spent if they described the quality of food or selection or cleanliness. The advertisement should remind customers of the good dining experience. Your differentiator needs to distinguish you from your competitors but must also be a benefit your customer.
Segmenting the market to serve a specific group can be an effective differentiator. Established in 1983, Chico's began in a small store on Sanibel Island, Florida, with Marvin and Helene Gralnick, who sold Mexican folk art and cotton sweaters. By 2003, the Gralnick's grew their enterprise to 360 stores nationwide. Chico's prides itself on exclusive private label designs and amazing personal service. Chico's is a unique retail environment. When a customer walks into a Chico's, she can depend on a member of the sales staff to coordinate, accessorize, and help her build a wardrobe to suit her needs. Chico's fashions are designed and developed by their own product development team, which allows them to provide their customers with new styles each week.
Chico's has clearly defined its customer profile. They cater to an upscale audience of women between the ages of 35 and 55. They have further differentiated themselves by offering clothing in only four sizes rather than the traditional eight sizes of most women's clothing stores.
Chico's has differentiated itself by how their sales staff interacts with the customers and the products they offer. The 2002 holiday season sales figures for most retailers showed very modest increases or declines in sales in the 4-percent to 15-percent range. During this same period, Chico's enjoyed a 44-percent increase in its sales. Its differentiators were the difference.
Through differentiation, you are demonstrating why your customer should do business with you instead of your competitor. If there is no difference, or if the difference is not significant between you and your competitor, your customer has no reason to choose you over the other guy.
Matt is a radiologist. He has a fairly large practice with a group of other radiologists, and they provide radiology services to several hospitals in their area. Matt and I were visiting recently and I was telling him about this book. He expressed some interest in the value of customer loyalty. My first assumption was that loyalty probably wasn't relevant to his business because people either need his services or they don't. No one stops by for a CAT scan because they like to do business with you.
Matt corrected me and said that his real customers are not his patients, but instead are the physicians who refer patients to him. The problem he disclosed was the difficulty in differentiating his practice from the other radiologists in town. They all use the same equipment. They are all board certified. They are all competent, educated, and similarly equipped. "So how do I represent myself differently?" he asked.
We thought about his situation for a few minutes and then organized our observations.
Matt's customers are the referring physicians.
Patients go to the radiologist their attending physician recommends.
Any action Matt takes should be directed toward the referring physician.
There is little perceived difference between one radiologist and another.
Based on these observations, Matt devised a plan to include the referring physician as well as the patient's family physician on the progress of the patient. Whenever a procedure is performed on the patient (an X-ray, CAT scan, or any other treatment) the referring physician is notified immediately by e-mail or fax. This electronic contact is much faster than any courier or regular mail contact. The referring physician can maintain contact with the patient, is able to visit the patient in the hospital, if appropriate, or can schedule followup office visits. The referring physician is empowered to oversee his patient. Instead of the patient feeling like they are dealing with several different vendors of healthcare, the patient feels there is a coordinated effort being made in their treatment. For a referring physician, Matt's follow-up e-mails and faxes are powerful differentiators. Matt clearly defines who the customer is and what is of value to them. The referring physicians want to use Matt's group for all their radiology work because there is a meaningful difference.
Some businesses such as Matt's group can successfully differentiate by offering one or two unique services. Other businesses have been successful by offering many unique differentiators. Fresh Market is a small chain of grocery stores in the southeastern part of the country. Fresh Market stores are larger than convenient stores but are substantially smaller than a supermarket. Fresh Markets are differentiated from other grocery stores by their interior design, product offerings, and level of service. Fresh Markets do not compete with supermarkets. The Fresh Market shopping experience is much more sensual. The lighting is more like a lounge than a grocery store. Spotlights illuminate the produce, meat, seafood, and bakery departments. Aisles of canned goods, pasta, and other staples have dimmer lighting. As the name implies, Fresh Markets have a limited selection of everything except fresh meats, fresh produce, fresh bakery goods, candies, coffees, specialty foods, cheeses, and wine. A shopping trip to the Fresh Market is a treat. The Fresh Market is different from other grocery stores. They provide a unique shopping experience and are rewarded with a growing loyal clientele.
If you want to maximize loyalty in your customers, you must also give your customers a differentiator. In your bagel shop, clothing store, insurance agency, law office, medical practice, or whatever kind of business you have, you need to provide a unique difference to give your customers a reason to return.