My experience with successfully differentiating a business

I exited the financial services industry as the president of a public subsidiary. During my 7 year tenure as president, I increased shareholder returns by 300%. The driving force behind my success was the successful differentiation of the business I managed.

Along the way to building the business, there was not a single day that passed where I did not ask myself "how can we be different?" Being one of not many, or in other words, standing out from the crowd, was constantly on my mind.

I'll give you some background information on the situation I faced. It will probably sound familiar to what you're facing as a business owner (dealing with competitors, how to price your product, customer experience, distribution channels, etc).

Across the industry, the core service that my business and competitor's offered had become commoditized. This means that the service was essentially the same for every competitor and price became the determining factor in a consumer's decision to make a purchase. Similar to a bar of gold, the consumer would simply choose the bar of gold that has the best price. There was no separation between competitors other than price.

Competing on price erodes profits in an industry. Competitors are essentially on a race to the bottom and while the consumer profits from the situation, market participant's earnings evaporate. The classic example is the airline industry.

The pricing model for my industry was the same for all competitors. It was called a "cost plus" service. The competitors would charge a "plus" fee in the form of a fixed administration rate that was a percentage of the cost charged to the customer. Since the industry began in 1997, "cost plus" had become the established norm for pricing. Given the saturation in the market, pricing became a focal point of how to differentiate. How can we be different with our pricing?

On top of the pricing model, distribution of the service was also identical amongst competitors in the industry. Competitors used a network of agents to distribute and introduce their service to consumers. Agents were compensated for their role in distribution by receiving a percentage of the "plus" fee that was charged to the customer. Distribution therefore became another opportunity for differentiation.

Along with pricing and distribution, the industry as a whole faced a common perception from consumers that the service (call it an insurance plan) created a frustrating experience with slow turnaround times, difficulty understanding the service, and unresponsive support. Herein lay other opportunities for differentiation.

While I became president of the business in 2017, the foundation for differentiation began in 2013. In that year, my business underwent a fundamental shift of mind with the way it approached marketing. The business moved from an outbound to an Inbound methodology. As the inbound mindset took form, our distribution model began to change from an agent based model to a direct to consumer model. An industry first.

As the Inbound seed was planted, it opened the possibility for innovation and disruption in the industry pricing model. The industry relied on agents for distribution and the pricing model was tied to compensating agents. With no agent, my business was able to transform the pricing model in such a way that could not be duplicated by competitors that relied on an agent based distribution model.

My business introduced an industry first, subscription model for its service. Instead of paying a "plus" administration fee, our customers paid one, low yearly amount that automatically renewed once per year. The new model provided upfront certainty on cost, a time saving component when using the service, and an easier experience.

As the new model took hold, we were able to further differentiate by transforming what consumers thought about using health insurance. At the time of my exit, the business had a 4.8/5 rating on Google with nearly 500 reviews. The reviews centred on the customer experience and the value created by creating an easy to use platform.

The beautiful thing about the journey to becoming one of not many, is that every area of your business will improve as a result of standing out from your competitors. Revenue increases as you attract and retain loyal customers, costs decrease as you become operationally more efficient, and the result is an increase in profit.

The key to every strategy is based on being different. You want your business to be one of not many. You want to leverage what it is that you do best. This is your competitive advantage.

Your competitive advantage is the unique attribute or capability that allows your business to outperform competitors in the market. It is what makes a company’s products, services, or operations more desirable or valuable to customers compared to those of its rivals.

Being unique in a way that your customers value is how to achieve sustainable growth. Every day you should be asking the question "how do we become one of not many."

As a small business owner, begin your journey to becoming one of not many and fundamentally transform your business. I would love to hear your story.

Email me ken@inegmaconsulting.com or call me directly 587.574.9521.