Differentiation

Stand out, get clicked

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“Overoptimization can lead to undifferentiation”, as Rory Sutherland says. Over-reliance on SEO has left many businesses undifferentiated and vulnerable as Google has introduced more algorithms that reward user behavior.

In this follow-up Memo to my article about crafting SEO strategies, I want to offer differentiation as an alternative to the common “out-execute” approach. Most companies try to publish more content, build more links and ship more technical optimizations to beat their competitors. But I see that approach being less successful these days:

1. Out-executing only works in head-to-head races and is only possible for new market entrants with massive budgets.

2. It drives up costs as competitors need to invest more resources for marginal advantages.

3. It leads to more “sameness“, with content and user experience merging across several market players.

The best way to compete is to do things differently. In Favoritism, I observed that Google gives “brands”, companies with popularity that doesn’t just come from rigorous advertising but a differentiated product, a lot more visibility in Search than aggregators and affiliates.

So, how can you differentiate yourself and how does differentiation translate to SEO?

WHY

For tech companies, differentiation Is the only way to compete. Most markets converge to a winner-takes-it-all situation, with maybe a second place that has a business. Classic literature often describes competition via price or services in commoditized markets like consumer goods, airlines, gas stations or fast food chains. But in tech, commoditization and price competition is a race to the bottom, at least in the long term.

Companies with strong differentiation typically see higher profit margins because they can charge for perceived value or scarcity. They gain more market share and stronger brand awareness and loyalty.

Examples of differentiated companies:

• Apple: reliable products in an integrated ecosystem that provides a seamless user experience

• Tesla: cutting-edge technology like autonomous driving features and wide charging network

• Netflix: personalized recommendations and unique content

• Airbnb: diverse and unique stays and experiences

• Dyson: innovative engineering and design

Netflix has much higher gross profit margins (~15%) than Comcast or AT&T (~5-10%). Airbnb achieved an average of 20% gross profit margin compared to Marriott’s 12% or Hilton’s 12%. It’s hard to figure out, but it's worth it.

Not every company can be Netflix or Tesla, and not every company has to be. Differentiation is relative to the target market, no matter the size. As long as you’re different and provide value, you stand out.

HOW

April Dunford put it best: “Positioning defines how your product is the best in the world at something that a well defined audience cares about.” Another way to say it: value proposition comes from satisfying the need. Differentiation comes from exceeding the want.

Differentiation can happen on 3 levels:

• Price - how much a company charges

• Features - what a company offers

• Value chain - how a company creates and delivers its product

I mentioned that differentiating based on price is the weakest position because someone else can challenge you to a race to the bottom or simply undercut your price. Remember Jeff Bezos’ “your margin is my opportunity”? So, you want to figure out how to stand out in either features or the way you bring your product to market.

3 steps to feature-based differentiation:

1. List all features (e.g., heart-rate monitor) and attributes (e.g. water resistant) of your product.

2. Compare how each feature or attribute stacks up to rivals.

3. Challenge each factor: which can you remove, deprioritize, strengthen or build?

3 steps to value-chain differentiation:

1. Map all activities your company goes through to create and deliver the product, from manufacturing to logistics and marketing

2. Determine the cost and value of each activity (e.g., customer satisfaction and enterprise value)

3. Identify competitive advantage opportunities, e.g., unique or exclusive partnerships or features

An alternative is the Kano Model, which maps product features to customer satisfaction and functionality based on a survey and groups them by:

• must-be (expected)

• performance (desired)

• attractive (excitement)

• indifferent (unimportant)

• reverse (dissatisfaction)

Mind you, differentiation can go away. Snapchat, for example, used to stand out much more with unique features until Instagram copied them. Repeating assessments regularly is critical.

SEO

Google seems to evaluate sites so much more on customer demand (brand search volume) and customer experience (user signals), which means SEO for undifferentiated products is like driving with the handbrake pulled. In my experience, you need to be a lot more aggressive about SEO when working with an undifferentiated brand, which also increases the risk of being hit by algorithm updates. In my experience, differentiated brands strongly benefit from robust basics and provide more wiggle room for creative approaches. They are more often rewarded by algorithm updates and achieve higher than average click-through rates in the search results.

Should you drop everything and ring the alarm about differentiation? No. Start with SEO. In most cases, you can’t simply throw around recommendations for product differentiation as an SEO. Here’s how I recommend approaching differentiation:

• Get SEO basics and low-hanging fruit into good shape

• Work on differentiating your SEO approach

• Then, look for documentation and strategy around differentiation

• If there’s none, do a high-level assessment

• If the assessment reveals low or no differentiation, challenge leadership to build stronger competitive advantages

Assess your approach to SEO against competitors across three groups:

1/ Content uniqueness:

• Do you have unique expertise, angles, data, customer stories / testimonials / case studies?

• Can you invest in programmatic /product-led SEO or editorial content in contrast to what everyone else is doing?

• Can you forge unique or exclusive content partnerships?

2./ Infrastructure:

• Do you have a flexible CMS?

• Is your mobile setup robust or problematic?

• Can you build custom tooling to move faster or surface unique insights?

• Can you automate processes?

3/ Authority:

• Do you have rare backlinks no one else can get?

• Do you have popular experts writing content on your site?

• Can you offer tools no one else has?

At G2, for example, we strongly leveraged the number of software solutions as a differentiator and reflected it in our titles, content and user experience. We leveraged attention from buyers as a lever for natural link building. And, we used our resource advantage to add unique content to different page types.

HYPOTHESIS

Two of the biggest Search disruptors are AI chatbots and AI Overviews. In my analysis of +500k AIOs, better-ranking sites are more likely to be cited. If differentiation leads to success in classic search, it also should in AI answers.

I want to validate two hypotheses in the near future to prove that point:

• One, differentiated brands are less sensitive to AI Overviews and AI chatbots because they tend to get more direct visits than undifferentiated sites.

• Two, differentiated brands can be more attractive for exclusive content-licensing deals (only an option for a small number of sites) and get more citations in AI Overviews and AI chatbots.