Whenever I speak with B2B SaaS founders around ‘differentiation,’ the conversation goes toward ‘the competition.’ “Here’s how we are different from competitor X or Y.”
My POV – who cares?! It doesn’t mind how you’re SaaS product is different than your competitors. It only matters in the mind of the customers – and then it’s about something completely different.
But before we dig into that – let’s first define things.
What’s the definition of SaaS Product Differentiation?
SaaS Product differentiation is the characteristic or characteristics that make your product stand out to your ideal customer in a way that’s so valuable that they’d happily pay a premium.
It’s about what they see in your product that can help them make a difference that’s meaningful and desirable to them.
So with that in mind, what if we’d start to talk about it in terms of “Here’s how we make a difference for you (customer)” and forget about ‘the competition’ altogether?
How to grow SaaS product differentiation?
Step 1: Forget the competition
Talking about the competition is not your task. We’re doing nobody a favor doing so. It reflects poorly on us (bashing), and more importantly, the way we talk about it is often totally out of the context of what the customer aims to achieve. So bringing the competition into the mix likely brings you further away from your objective rather than closer.
The challenge is our ‘competitive’ mindset. We are up against ‘them,’ and we believe our customer needs to understand what our competitive advantage is compared to ‘them.’
But do they? Are they after finding out how you are different from ‘them’, or are they after understanding which, of all the alternatives they have, helps them solve their problem in the most valuable way?
I deliberately used the word ‘alternative’ – because that’s what your customer has. They have more options than just ‘the others.’ They can build something themselves. They can do nothing at all. They can use a range of standard tools to achieve what they are after – as said: There are many ways to Rome, and it’s your job to give them one that is an experience they’d love to embark on.
Step 2: Forget the word Differentiation.
So what if we’d remove the word ‘Differentiation’ from our memory and replace it with ‘Making a difference.’ Using those words by default makes us focus on the magic combo of ‘the customer and us’ rather than ‘us versus the competition.’
It makes us think hard about how we can help our customers make a difference.
It forces us to listen and fully understand their individual needs, what difference they seek to make, and why that is important to them or their business.
It forces us to listen and fully understand what hurdles they currently face doing so and how that makes them feel.
It forces us to be the guide and make them the hero, rather than taking that hero role ourselves by trying to look better than the competition.
All of this is about driving value up rather than ending up with a lower price point by facilitating an ‘apple to apple’ comparison and ultimately ending up in a discount battle.
Step 3: Carve out the “magic concepts” that drive the value
As said in the definition above, it’s about the “characteristic or characteristics” that make your product stand out.
It’s not a feature. A lot of SaaS vendors make the mistake of naming individual features when they’re asked what makes them stand out. Individual features are easy to copy – so what you’re looking for is something that’s not easy to copy – or that other vendors could add to their next sprint.
What you’re looking for is what I refer to as the magic concepts of your SaaS product / SaaS business. Think about first principles, design concepts, its DNA or a group of features that, together, provide your SaaS product with a unique characteristic that drives specific value for a well-defined set of customers.
When I was at Unit4, our Business World ERP suite helped customers make a meaningful difference because of the inherent flexibility of the information model. Where our product could do the same as other ERPs functionality-wise – it stood out when used in rapidly dynamic business environments – in organizations that reorganized a lot, acquired and merged many businesses, expanded into different regions and countries, and so on. In those situations, our suite became incomparable to our ideal customers. The result: here, we won +80% of the deals – at a premium deal value (often 2x the price as our nearest alternative).
The hidden benefits: Resourcefulness and trust
Changing our vocabulary will help us become more resourceful and find new creative ways to grow trust with our ideal customers within our target market.
It will make us more resourceful because it will become clear very early on if we exceed expectations in helping this customer make a difference with our solution. If not – we can qualify out and not waste our time. Let them enjoy ‘the competition.’
It will grow trust because we’re getting very concrete in what the journey will look like to go from ‘what is’ to ‘what can be.’ This strengthens our value proposition, and we can back up our promise all the way because we come from a position of strength.
We’ll attract better customers – customers that can and will become our advocates. They’re the fuel to grow momentum.
How to start fixing your SaaS product differentiation?
The easiest way. Simply book a free call to explore if there’s a fit to do this together.
Otherwise – here are five other options that all matter in this process:
- Long-form blog to tune your B2B SaaS Segmentation
- Long-form blog: 5 strategies to optimally position your B2B SaaS business
- Long-form blog to creating a SaaS Value Proposition that works
- and obviously, read my book The Remarkable Effect
- or simply subscribe to my daily email down below.