Competitive positioning, USP and UVP
You know your competitors. But how are you different to them? Why are your better? Why will people buy your product and not theirs? What's the difference between differentiation and Unique Selling Proposition? Between differentiation and competitive advantage? Isn't the USP the same as the Unique Value Proposition? There are so many different confusing terms: Innovation, Differentiation, USP, UVP... Let's have a look.
What are Innovation, Differentiation, USP and UVP?
Innovation
If you are a startup, it means you are doing something innovative. Your innovation can touch upon one or multiple aspects of a business. For example, product, offering, experiences, business model or operation.
Product
Materials, Technology & Manufacturing Processes: You are using new materials, technologies or manufacturing processes to develop a new or better product
Technology: You've developed a new technology
Features: You have innovative features
Offering
You are extending or narrowing your product / service line. Typically, you are either more specialized on something or covering something "end-to-end" (if we want to use buzz terms)
Experiences
Brand: Your brand communicates unique values and stands out for specific initiatives
Customer experiences: You are changing customer experiences in the buying, using and / or after-sales processes. Potentially, adding new services for customers
Business Model
Revenue Model: You have new revenue models
Target Group: You are catering your products/services to new types of customer groups and aligning everything to fit them
Distribution: you have different distribution channels
Network: you have established a network in a certain area to create value
Operations
You have a more efficient operational setup that allows you to have higher margins
Differentiation
Innovation is related to the internal set-up of your business and how you are creating value. It answers the questions "What is innovative in your business?". Differentiation, on the other hand, is customer-centric. It underlines the key differences, for customers, between your startup and the competitors' businesses, and/or between your products or services and your competitors'. Differentiation answers the question: "How / why are you different from your competitors?" (from a customer perspective). Usually, as a result of your innovation, you will have differentiation points to competitors. Some of of the points mentioned in "Innovation" are also applicable for differentiation, if they are related to the customers. For example:
Product: better or different products
Product coverage: extending the line of complementary products services
Quality: your are offering a product / service with higher quality
Price: you are offering the same product /service for a lower price
Performance: your product performs better than the other products
Design: you are offering a product that looks and feels better
Customer / user experience: you are changing the customer / user experience for the better with buying, using, after-sales processes and additional services
Revenue model: customers have more convenient ways of paying
Distribution: customers can buy products on more appropriate channels
Brand: your brand communicates unique values and stands out for specific initiatives
Network: your network creates value for the customer
Unique Selling Point or Proposition (USP)
The Unique Selling Point, is exactly what it is = unique. It's the one differentiation point that is most important to your customers that you underline in your marketing communication.
Unique Value Proposition (UVP)
Finally, as mentioned the Value Proposition is the benefits your customers get when using your product or services. It's a statement directed to your customers. It can easily integrate the USP as well.
Why are Innovation, Differentiation, USP and UVP important?
It's very simple. As a business, you goal is to attract and retain clients and ultimately make revenues and profits. Your customers need to know why you are different than competitors, why they should go to you and not others and what benefits they will get. To communicate that to your clients these points need to be clear. But don't worry if you don't have them yet. They will formulate when you advance in the development of your startup. Moreover, investors will look at the competitive environment to determine whether 1) there are a lot of competitors or few 2) you have a strong differentiation / USP and capacity to attract customers with your offer.
How to define your competitive positioning?
In the competitor analysis from Part 3, Block 3: Competitors, you have already gathered information on your competitors such as key features and USP. Now, you can start visualizing this to make it more clear for yourself and your stakeholders. We offer two main ways to do so: 1) Differentiation Matrix 2) Differentiation Categories.
Differentiation Matrix
For the Differentiation Matrix, you just need to choose your two most important differentiators along the x- and y- axes and then position your competitors where appropriate. You don't need to be precise, just keep your competitors in the squares and try to adapt the axes so that you end up in the upper right corner.
Differentiation Categories
In the Categories, you can simply segment your competitors into distinctive categories (as many as you want, but not too many), explain what is special about each category and indicate where you are situated.
While it's good to start thinking about Innovation, Differentiation, USP and UVP, this will become clearer when you advance in the development of your prototype, MVP or product in the section MVP and Product-Market Fit. These topics should be reviewed, tested and new information added along the way.