Many businesses struggle with one simple question:
“Why should people buy from us?”
To know the answer is to know your key differentiator. It is what sets you apart from your competitors.
Read on to learn what types of key differentiators there are, how you can find yours, and why an easy-to-implement differentiator is not always the best option.
What Is a Key Differentiator?
A key differentiator refers to a unique quality of your brand. It’s what sets you apart from your competitors. The term unique value proposition (USP) is often used synonymously.
Your key differentiator answers the question:
“Why should people buy from us?”
A key differentiator can take many forms:
- It could be a unique feature of your product
- It could be your brand’s helpful content
- It could be your outstanding support
- It could be your lenient return policy
Any touchpoint of the customer journey can function as your key differentiator.
The more differentiators you can amass, the more likely you are to dominate your market. For example, Apple is not only known for the high quality of its computers, but also for their slick design.
The idea of differentiation goes back to Edward Chamberlin’s “Theory of Monoplastic Competition,” published in 1933. Chamberlin postulated that companies in a monopolistically competitive industry would be “too small” to compete if they do not differentiate their products.
So, it’s even more important to be clear on your key differentiator as a small or mid-sized business. Being strategic — working on your business, not in your business — is the way to go.
Product Differentiator vs. Brand Differentiator
You can further distinguish between product differentiators and brand differentiators.
Product differentiators are narrow, brand differentiators are wide. It all depends on context.
For example, the product differentiator of the Mach-E is its electric engine. It was the first Ford Mustang with such a feature. But it’s not the brand’s key differentiator. Mustang still sells mostly combustion engines.
In comparison, electric engines are Tesla’s brand differentiator (one of several, actually). It is what put them on the map in the automotive industry.
What Characteristics Apply?
Any key differentiator is defined by 6 characteristics:
- It must be unique. Ideally, nobody else should offer what you offer. If a customer wants feature X, you should be their sole option.
- It must be valuable. Your differentiator must provide an advantage to your customer, be it monetary, time-saving, or increased convenience.
- It must be true. Your key differentiator must be real, not imaginary.
- It must be provable. Even if your key differentiator is true, that won’t mean anything unless you can prove it to your clients.
- It must be specific. The more concrete your key differentiator, the easier it is to communicate.
- It must be defendable. If any of your competitors can easily copy your key differentiator, it won’t serve you for long.
The 27 Types of Differentiators
There are 27 types of differentiators you can use to set your business apart. They each fall into one of eight categories:
- Product related
- Price related
- Primacy related
- Competency related
- Past related
- Customer related
- Service related
- Marketing related
Let’s look at them in turn.
I. Product Related Differentiators
The way your product works can be a great source of differentiation.
This is the first key differentiator that comes to mind. If you build the best product within your industry, many customers will choose you.
I am not an Apple fanboy, but they build the best laptops on the market. And everybody knows it.
German cars are another example. Mercedes, BMW, and Porsche are superior in terms of quality, comfort, and design.
Yet, even though a quality-based differentiator is such an obvious choice, it is defendable.
Coming up with true quality is hard. You have to pay attention to a plethora of details — raw materials, suppliers, team members, processes, manufacturing equipment, quality control, etc.
Most companies will not go through with it. At one point or another, they will cut corners. If you can overcome this tendency, you will reign supreme.
Innovation, i.e., coming up with a new way of doings things, can be a powerful differentiator.
Again, Apple. With the iPod, they revolutionized the music business. Overnight, Discmans and CDs became obsolete.
Same with the iPhone. Mobile phones suddenly became mobile entertainment and office units.
There is an upside and a downside to innovation-based key differentiators.
The upside is that, initially, you own the market. There is nobody else who has what you have. As a result, sales skyrocket.
The downside — there will be copycats. Just think of Samsung, Huawei, Google and the numerous other iPhone clones.
So to last, you must combine with other key differentiators, like, in the case of Apple, quality or aesthetics.
Aesthetics as a key differentiator is often thrown in with the quality approach, but the two are not the same.
For example, Volkswagen builds cars that are considered high quality (or at least were, until the “diesel dupe”). But they aren’t sexy.
On the other hand, you have Italian car manufacturer Alfa Romeo, who builds very stylish cars, that also fall apart rather quickly.
The same thing happens in fashion. Everlane sells durable clothing, but the designs are bland. Zara on the other hand looks stylish, but their stuff rarely holds up longer than six months.
So, aesthetics can be a key differentiator in their own right.
II. Price Related Differentiators
Price is another chance to differentiate yourself.
4. Price point-based
Price is one of the most obvious differentiators. If you sell the same (or a similar) product, but cheaper than anybody else, you will see huge demand.
A real-world example of that is Aldi, the German discounter chain. You can buy knock-offs of popular grocery brands that pretty much taste the same, but for a fraction of the price. Consequently, millions of people now shop at Aldi.
Low-fare carriers are another example. Airplane travel used to be expensive. Then came Southwest Airlines in the US, Ryanair in Europe, and AirAsia in Southeast Asia. With their low fares, they revolutionized the aviation industry.
But price point is a difficult key differentiator to uphold, as all of these businesses have experienced first hand. Aldi is waging an international price war with Lidl, another Germany-based discounter chain.
Likewise, Southwest Airlines is in a constant price war with Delta Air Lines and several smaller low-cost carriers.
Be aware of this dynamic before you build your key differentiator around price.
5. Pricing Structure-based
One key differentiator that I like to use with my marketing agency is pricing structure-based. This is not to be confused with price point-based. I am not trying to underbid the competition. Rather, I am offering a more flexible model.
Where most of our competitors sell 3-month or 6-month retainers, we do nothing of the sort. If you are not happy with the results, you can cancel our services at any time.
Similarly, when I still ran my MMA gym, we would be the only gym in town to offer monthly payments. All other gyms would insist on 6-, 12-, or even 18-months contracts.
Naturally, clients value this flexibility. But for this to work, you must pay attention to quality.
If you are producing great results, customers will happily stick with you for a long time, even if they don’t have to. But if you don’t, you will suffer from high churn.
III. Primacy Related Differentiators
The first, the biggest, the fastest — customers value primacy.
Location is one of the easiest key differentiators to implement, but also one of the easiest to copy.
Let’s say you would like to start a local business. To increase your likelihood of success, you could specifically zoom in on business models that do not exist in your town yet.
Your town is missing a Thai massage place? People can’t buy vegan groceries? You don’t have a movie theater?
If you are the first and the only one, you will almost certainly see business. But the danger is that there will be copycats, attracted to the party by your easy success.
“The biggest supermarket in the town.”
“The largest car dealership in Cincinnati.”
“No other gym in the city has more square feet.”
Size is another key differentiator. We think bigger is better. But your competitors know that, too, and might soon surpass your size. If you then have nothing else to offer, your business might be in danger.
If you are quicker to adapt to trends than your competitors, this can become your key differentiator.
Fashion brands like H&M and Zara do this. They will pick up on new styles faster than everybody else.
The same is true for professional artists. Madonna is the prime example. For decades, she was quick to sense a new sound emerging, and then adapted her own image to become the forerunner of this trend.
IV. Competency Related Differentiators
Be more competent than your competitors, and you have a powerful differentiator.
The idea with niche-based differentiators is to drill further down into the market than your competitors.
For example, you might run a digital marketing agency. But instead of offering all kinds of online marketing — SEO, Paid Ads, social media, branding — you might only do TikTok marketing for dentists.
This might already be enough to be the only one. If not, drill down even further. For example, do TikTok marketing for children’s dentists in Arizona.
There are two ways to drill further down — the provider side and the customer side.
In our example, the provider side is you going from general marketing agency to specialized TikTok marketer.
The customer side is moving from general market to dentists.
This key differentiator might seem like a losing proposition, as the further you drill down, the smaller your market gets.
But the opposite is true. We value specialists. Their extreme focus equals competency. In comparison, generalists tend to be mediocre at many things.
If you know much more than your competitors, you can use this knowledge to stand out.
These special insights could be about your customers. For example, if you know better than anyone else where your audience hangs out online, you can put up targeted advertisements in the forums they frequent.
Your specific knowledge can also be about your product. If you are a chemical engineering company, and you have access to superior formulas, you will overtake your competition.
The danger is here that someone else might discover the same information. That is why The Coca-Cola Company’s formula for Coca-Cola syrup is a closely guarded trade secret.
You must become similarly protective of yours.
V. Past Related Differentiators
Your past — where you come from, what you have done — can be another great differentiator.
Sometimes creating a key differentiator is as simple as emphasizing your background. This could be you having a certain cultural background or sexual orientation. Provided you are willing to share these facts, they act as powerful identifiers.
Let’s say you run a ballet studio. There are dozens of other dance studios in town. But you are the only one specifically catering to Russian-speaking immigrants, as your parents are originally from St. Petersburg. Of course, all the Russian kids are sent your way.
Or maybe you have a trading firm. But unlike your heteronormative competitors, you lead with your homosexuality. As a result, you get all the wealthy gay men in your city to invest with you.
This is a variation of the background-based differentiator, but applied to your team. If all of your staff share a certain commonality, you can use this as your key differentiator.
For example, if all of your staff attended the same university, that might give you an in with other graduates. Or you might be able to work for your former alma mater directly, e.g., doing their catering.
13. Past Role-based
A business acquaintance of mine is a great example for this one. He used to run large sales teams in the telecommunication space. Now he offers sales trainings in the same industry.
These large telecommunication businesses simply choose him because he knows their world — their challenges, their people, their lingo.
They are not even concerned if he is the best trainer (even though I believe he is very good). It’s his past role that makes him stand out in their eyes.
I see this one in the marketing world all the time. An agency will provide a subpar customer experience, but still be on top, simply because they scored some big names in the past.
It’s about social proof. If I recognize your clients — the airline I flew with, the computer I bought — I will trust you. If these household names went with you, you must be doing something right.
A client-based differentiator works well, but only if you don’t rest on past accomplishments. Otherwise, it will eventually wear off.
This one is big in academe. If you won some prestigious grant or even the Nobel Prize, it will be much easier to secure funding for future projects.
Another example is IBM. They are still milking their legendary super-computer, “Watson,” to score massive government deals.
But if you use an accomplishment as your key differentiator, understand that there is a half-life period to it. If you won the Oscar last year, you will get plenty of offers. If you won it 30 years ago, less so.
VI. Customer Related Differentiators
Many companies focus on reasons why they are special. But it’s often better to zoom in on your customer.
If you have the most extensive network in your industry, this can act as your key differentiator.
I see this with many of the B2B companies that I do marketing for. Over the course of decades, they have created tight networks with customers, suppliers, and logistic partners.
Don’t miss the train on digital, though.
Many businesses still solely rely on in-person contacts. And while personal connections will never be replaced by virtual ones, the two will more and more complement each other.
While you are still hesitating, some of your competitors are already building these digital networks through content marketing and social media.
Once you wake up to this reality, they will have accumulated such an advantage online, it will be hard to catch up. So start to supplement your in-person efforts with digital methods now.
Here, you attach your business model to a specific role inside an industry.
Let’s say you are a business coach. Instead of appealing to executives in general, you could zoom in on CFOs in the fashion industry.
Now imagine a CFO at Ralph Lauren decides to get some business coaching. Out of the thousands of options available, there is only one coach — you —who is directly catering to CFOs in his or her industry.
Whom do you think they will go with? It’s a no-brainer.
But be aware that this is easy to replicate. Just one other business coach has the same idea, and there goes your differentiator.
18. Shared Value-based
This is another easy way to come up with your brand’s differentiator — emphasize certain shared values with your customer.
If you are the first skateboard manufacturer catering towards Christian kids, e.g., by printing bible scenes onto your decks, you suddenly get a significant market to yourself.
Likewise with the sustainability angle. If you are the first manufacturer of green, sustainable gaming accessories, there will be a subsection of video gamers buying only your tech.
If you can promise your customer a certain result, this might act as your key differentiator.
For example, in the consulting space, you could promise your customers to turn their 6-figure businesses into 7-figure businesses. That is a very enticing proposition.
The problem is that promises are cheap. It costs your competitors nothing to make the same promise.
You can see this in the fitness world. Personal trainers all lead with pictures of clients that got ripped.
But since everybody is doing that now, it’s not a differentiator anymore. It still works, but not as effectively as it used to.
VII. Service Related Differentiators
Serve your customers better than anybody else, and you will stand out.
If you can create the best sales experience for your customer, that is a great key differentiator.
For example, you might sell luxury yachts to billionaires. Instead of just showing them the boat, you could take them on a weekend trip. You could throw them a lavish party, with their favorite band performing, or their favorite movie star in attendance.
This will set you miles apart from the competition.
This works with regular folks too. Ikea is a great example for that. At no other furniture chain do I get served Swedish meatballs after I’m done wardrobe shopping.
Another way to stand out is the way you get your products to your customers.
Amazon is a great example of this. Their logistics are so convenient, I don’t want to order from anybody else.
I don’t have to leave the house. I don’t have to schlepp around bags. I get my goods faster than anywhere else. If I want to return something, there is zero discussion.
It’s no wonder that Amazon took over the retail world with their logistics-based key differentiator.
Support is not an obvious key differentiator for many companies. They think because support occurs after the sale, it is somehow less important.
This is a mistake, especially in engineering and the tech industry. If you sell me a super complex CRM software which I am then not able to figure out, I will share my frustration with my peers. Your sales will drop.
But if you excel at customer support, and I can reap much greater benefits because of it, sooner or later, the word will spread, and everybody will come to buy from you.
23. Customer Experience-based
Finally, you can strive to provide the best customer experience at every single touchpoint.
Some ways to do that:
- Provide a consistent experience. Nothing is more annoying for your client than having to explain themselves again and again (if you’ve ever had to call UPS, you’ll know what I’m talking about). Therefore, make sure every bit of client data is centrally stored and can be accessed by all authorized team members.
- Practice a service mindset. As a customer, you can tell that most call-center workers don’t want to be there. They don’t care if your problem is solved or not. Training your staff well (and paying them more), is an easy way to stand out.
- Offer self-service options. If you can provide a pain free tool for your customer to fix his problem himself, instead of having to stay in line for 45 minutes, they will be extremely grateful.
- Personalize touchpoints. One way to do this is to use HubSpot. When your prospective clients visit your website multiple times, you can show them the exact content they need at each stage of the buyers’ journey. This will also improve lead flow.
- Incorporate feedback. With most mid-sized to large organizations, giving feedback is pointless; they never act on it. But if you are the one provider who does, your clients will sing your praises.
- Own your mistakes. If your company messes up, say so. Almost no else does. Admitting your mistakes will make you stand out positively, despite your goof-up.
VIII. Marketing Based Differentiators
Marketing can be another compelling differentiator. If you appear more attractive than anybody else, customers will flock to you.
Most potential customers are sick of hearing, “We’ve got the best product, we are so great, buy from us!”
Hence, content marketing. Here, you don’t try to aggressively convince your future customer. Rather, you provide them with helpful content that solves their problems.
For example, you might be an IT provider offering cloud solutions. When you consistently create blog articles that help your target audience — e.g., with digital-transformation issues — they will eventually come knocking on your door.
Not only do you create more leads this way, you also build yourself up as a brand. People will come across you again and again, and eventually recognize and trust you. This is how you go from being a small or mid-sized player to being a big player.
Another advantage of a content based approach — you can outsource it to a freelance writer or a content marketing agency.
Even with video, you could hire a spokesperson and a videographer to take care of the production side of things.
I am obviously biased, as I provide content-marketing services to companies, but I really think it is one of the best key differentiators out there.
That’s exactly because it takes so much time and effort.
Where everybody else is fixated on the quick sale, you are playing the long game. And that means publishing hundreds of high-quality blog articles or videos. Very few companies are willing to do that.
But if you can muster that consistency, the result will be exponential growth for years to come.
If you get a famous name to be the face of your brand, this, too, can become your brand’s differentiator.
I know two guys who wrote a cookbook a few years ago. Obviously, there are a million cookbooks out there, so it’s hard to stand out.
But they had an idea. They would collect all the recipes of celebrity fitness vloggers in one place — the cookbook for the generation YouTube.
It worked like a charm. The fame of these vloggers rubbed off on them. They are now also offering various online courses.
The George Foreman Grill is another example from pre-digital times. So is Michael Jordan’s cooperation with Nike.
In the same vein, you can leverage a parent company’s name.
This is quite common in the music world. Epiphone guitars are sold by association with the more prestigious Gibson brand. Likewise, Squier guitars profit from their connection with Fender.
The personality-based differentiator is a mix of the content and the fame approach. Instead of using pre-existing stardom, you build yourself up. And you do so through videos, podcasts, tweets, etc.
The king of personal branding is Gary Vaynerchuk.
Early in his career, he dramatically scaled up his father’s wine business by producing hundreds of wine-related YouTube videos, with him as the face of the company.
Later, he did the same for his own media company, becoming one of the top providers in the agency market. This time around, he used a larger mix of platforms, from podcasts to short-form video.
There are more examples like that. Martha Stewart, Tony Robbins, Tim Ferriss, Bill Nye, and Billie Eilish all come to mind.
Despite these success stories, not too many business leaders are utilizing this powerful differentiator. Especially if you are in the B2B world, you might be the first person applying this strategy in your niche.
Naturally, it’s an extremely defendable replicator. Because there is only one you, that cannot be copied.
The downside is that it takes a huge amount of time and effort to create the needed content. Most busy CEOs are not ready to do that.
If you can surprise your customer through innovative marketing, this can become your brand’s differentiator.
The fashion brand Benetton is well known for that. Their 90s campaign of naked body parts with “H.I.V. POSITIVE” tattoos created an uproar. But it also increased sales.
You can also subvert your customer’s expectations. Tesla did that by skipping over car dealerships, and instead presenting their vehicles at your local mall.
This differentiator works very well, but if you go with the shock factor, be wary of the repercussions.
Also, understand that the surprise effect wears off. If you have seen a couple of Tesla showrooms, they become normal.
How To Find the Right Differentiator For You
To choose the right differentiator for your business, follow this game plan.
1. Make an Initial List
Looking at the 27 types we talked about, create a rough list of differentiators that you might be able to pull off.
Rule out options that clearly don’t make sense. If you are a two-person start-up, you probably won’t enlist 50 Cent as your brand ambassador.
Even so, this list will be pretty long. So now, we need to narrow it down.
2. Look at Your Competitors
For your key differentiator to work, it should be unique. Ideally, nobody else in your industry should be using it.
To determine if that is the case, make a list of your competitors. Then, for each competitor, note down their key differentiator.
The best way to do this is to ask the actual customers of your competitors. They usually know best why they chose a certain provider.
Now take a look at the finished list. Why are these differentiators working? How well are they working? Learn what you can. Understanding your competitor’s business model better is always an advantage.
But then, going back to your original list, cross off these already taken differentiators. The point of a differentiator is to make you stand out. You don’t want to be a bad copy of somebody else.
There are a few exceptions, though. If one of your competitors is struggling with their key differentiator, this is up for grabs. But then, you must do a better job.
Also, if you go with a content or a personal branding approach, that is perfectly fine, too, even though somebody else might be doing that.
But then your content must be different. Maybe, where they try to present themselves as uber professional, you project a more laid back and personable attitude.
Or maybe you utilize a different platform — where they went with Twitter, you take a more visual approach with Instagram.
3. Take Your Customer’s Perspective
A key differentiator should make you stand out in the eyes of your customer.
Therefore, ask yourself, “Which of the options on our list will make us stand out the most — from our customers’ perspective?”
For example, a manufacturer of tractor engines might obsess over a certain spec, while their customers won’t care. They only care about durability.
Building a brand is not about giving yourself an ego boost. It is about serving your target audience the best you can. Your key differentiator must reflect that.
4. Rank Your List by Difficulty
Not all differentiators are the same. Some are much easier to implement than others.
For example, underbidding your competition is a relatively easy thing to do, provided you can live with the lower margin.
Another example of easy is using your personal background. If you are a Russian immigrant, appealing to Russian ballet students in your city will come naturally.
On the opposite end of the spectrum, we have quality. To develop a product that is miles beyond the competition will take years.
The content and personal branding approaches also take years to pull off. You need to produce hundreds of articles and videos first.
So does an innovation-based approach. Inventing the next Google, Facebook or Tesla is a major undertaking.
It also depends on what you bring to the table. If you are a natural communicator, the relationship-based differentiator will be easier to pull off than if you were an introvert.
Similarly, if you have an outstanding sense of style, using aesthetics as a differentiator will feel effortless. But if your fiancé is buying all your clothes, you might want to go with another option.
So, taking into account your personal strengths and weaknesses, rank the remaining differentiators by difficulty, from easiest to hardest.
5. Rank Your List by Defensibility
Certain key differentiators are much harder to defend than others.
Price, for example, is hard to defend. There will always be some new player in the market who is willing to undercut you.
Size is another hard-to-defend differentiator. You might own the biggest CrossFit gym in your neighborhood right now, but the next guys just have to beat you by a few square feet, and suddenly they are, “The Biggest CrossFit Box in Town!”
In contrast, other differentiators are much easier to defend:
- The content-based approach. When you produce hundreds of blog posts, podcasts, and videos, you gain massive authority in the eyes of search engines. This authority is hard to overtake.
- The quality-based approach. If your product is truly miles beyond the competition, they will have to invest lots of time and money to catch up.
- The service-based approach. Excellent customer service requires outstanding systems, like hiring, training, and feedback implementation. These systems are not easy to replicate.
So, the next step is to copy and paste your current list of differentiators. Keep the original list (ranked by difficulty). Rank the new copy by defensibility.
Now, compare the two.
This is the moment of truth — are there any differentiators that are both easy to implement, and at the same time easy to defend?
If there are, pick one of these ideal options. If not, pick the next best thing. Then start to implement it.
6. Anticipate Disruptions
Many industries are ripe for disruption. In the near future, an outside tech firm will come into their space and completely change the way things are done.
Keep this in mind when choosing your key differentiator. For example, both law services and real estate have remained virtually unchanged for decades. Most providers still rely on their personalities.
But imagine what will happen once AI takes over legal advice or the metaverse comes to real estate. Your charm won’t count for much anymore. Therefore, choose your differentiator with the future in mind.
7. Get Outside Input
I always recommend getting a second opinion before you commit to a differentiator.
When it comes to our own business, we all suffer from various delusions. We are too close and too invested in it.
An outsider, on the other hand, is much less invested. They can quickly identify our blind spots.
By outsider, I mean someone who has no previous connection with you, in business or otherwise. Consultants and coaches apply, friends don’t. You want someone who has no need to tread lightly around your feelings.
8. Ask Your Customers
Don’t just get feedback from a strategist — also ask the people on the ground, your customers.
You can use digital tools like SurveyMonkey to automate the polling process.
Questions to ask:
- Why did you choose us in the first place? What made us stand out in your eyes?
- When you approach me for advice now, what do you hope will happen?
- What can you rely on me for?
- What do you think is our special talent?
- How would you describe to someone else how we help customers?
- What do you feel after an interaction with us?
- In your opinion, what opportunities are we missing out on?
- What could be a reason for someone not to buy from us?
- If you were in our position, what would you do to create a stronger brand?
Bonus trick: Take note what peaks your customers’ interest during sales calls and meetings. Your differentiator might be right there.
9. Communicate Your Differentiator
It’s not enough to identify your key differentiator. You must also actively communicate it.
This is a common problem I see with my agency clients. To their minds, it will be crystal-clear what their key differentiator is. To their customers, not so much.
Understand that your clients are much less invested. Unlike you, they don’t spend hours each day thinking about your business.
Therefore, you must communicate your differentiator as if you were talking to a 3rd grader. Don’t try to be clever.
Be consistent across platforms. Your sales pages, your blog, your YouTube channel, your social media accounts — wherever your customer goes, they should encounter the same message.
The same goes for all other touchpoints of your customer journey. No matter if your client is talking to you on the phone or getting a message from support — use every chance to drive home your differentiator.
10. Combine Differentiators
Long-term, you want to combine differentiators for a unique differentiation strategy.
By adding differentiators, you will appear even more attractive to customers.
And for your competitors, it will become even harder to catch up.
Never do so from the start, though. You will just overextend yourself. Start with one thing. Only when you have successfully implemented this differentiator, do you add another one.
I cannot overemphasize this. It is probably the biggest problem I see when working with clients. They want to accomplish ten things at once and effectively accomplish — nothing.
Be smart, start small.