Monday, October 20, 2014

Differentiating Your Software

In recent years, marketing gurus have been telling us that we can differentiate our software products or services by improving our quality, by convincing our customers that we love them, or by running a streamlined company that impresses prospects and customers with our efficiency.

By contrast, Jack Trout tells us in his 2000 book "Differentiate or Die - Survival in Our Era of Killer Competition" that these ideas are old and tired. Trout is not suggesting that you can ignore these three potential differentiators. He's saying that customers expect your products and services to be high quality. They expect you to court and woo your customers. And they expect you to have a slick website, ordering regimen, and communication. You can't skimp on these business tools. But don't expect to get a bump in sales from them, or to use them to differentiate your company from your competitors' firms.

Trout talks about American Airlines and their creation of the first frequent flyers program back in 1983. American Airlines experienced brand loyalty, a rush of customers who previously used competing airlines, and an edge in the marketplace caused by the differentiation that its AAdvantage program offered. And it worked, for a very short period of time.

By 2000, American Airlines had 29 million AAdvantage members. And now all of its competitors have similar programs.

American Airlines is now locked into the program. It would be very painful to eliminate the program. And by keeping the program in place, Trout explains, they annoy many of their steady customers because they have to limit the flights that are available to them under the company's frequent flyers program.

It's not enough to focus on serving the customer, because all of your competitors are doing that, too. You need to differentiate your software from your competitors' applications.

Satisfaction is not the same as commitment, Trout tells us. You can survey your customers, confirm that they are satisfied with your product and service, and they'll still move to your competitors' offerings.

There was a time when improving operational effectiveness could differentiate your company from your competitors. Today, Trout tells us, most firms have focused on improving their operations. As a result, operational effectiveness rarely is a good way to differentiate yourself.

You'll succeed at using customer service to differentiate your software only if your competitors are silly enough to let you do it, Trout explains. To learn more about Trout's feelings about differentiation, please visit the "Differentiation for microISVs Step by Step" posting on this blog.

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