Product differentiation is important from the very start of any company, but as time goes on, the drive to “differentiate” can become quite narrowly focused on product features and market competition.

The real challenge is to remain strategic about your product development, keeping a finger on the pulse of your customers’ needs.

In this post, I’ll cover how to keep a competitive edge while avoiding the dreaded feature factory trap, and all the ways to ensure you’re making the right choices for your users.

What is product differentiation?

Product differentiation is the strategy of making what you sell seem better than any other option, on or off the market. We say “seem” because this all depends on the perspective (and perception) of your target customer.

What is a feature factory?

Factories are focused on production, on assembly line-enabled, non-stop output. Put that in a product development context and the meaning is pretty clear:

A feature factory is a team that focuses on building and releasing new features, for the sake of output and “growth” rather than following a defined vision. This vision is also called a product strategy, informed by research and experimentation.

Product management expert John Cutler coined this term a few years back to describe what happens inside many software companies that are desperate to grow.

The result is a bloated “Frankenstein” product with many different features and functions that at best, are not cohesive, and at worst, cause a lot of extra noise so that your customer is confused about how to use your product… or what to use it for.

The bottom line: a feature factory approach is not the best use of resources and likely won’t drive revenue.

How to avoid becoming a feature factory

This section could also be titled, “How to learn from your competitors without copying them.”

1. Don’t assume your competitor is building the right feature. 

Of course you want to stay aware of what they’re up to, but you can’t know the systems or culture in place that’s driving their decisions. Maybe their product management team isn’t doing discovery work. Maybe the tool is actually outdated or for a slightly different market than your own.

2. If a competitor has built something interesting, test their product yourself.
You usually have the opportunity to explore any curiosity (or suspicion) as a user! Go in as a researcher. Test the features, enter user forums or other related online discussions. Ask other people how they use that product and how well it works.

You might find some hidden opportunities, things that tool is missing that you can take advantage of. Or you find people hate certain features, and you can cross those off your list. 

How to ensure you have product differentiation

Don’t assume your competitor is another company
Your direct competition might not be a business at all. It could be whatever manual, jerry-rigged process the user came up with years ago! We all know old habits die hard.

So maybe you don’t need to highlight how you’re different from Company A (indeed, that could just be boosting awareness of a competitor). In this case, you’re fighting inertia and simultaneously trying to educate the user about why they need to change. Highlight how you are better than the old way.

Evaluate your tool through the lens of customers
Like I said up top, differentiation comes down to how your product is perceived in the market. So it depends on the types of people who use it.

Remember that you are not building something for everybody to use, but for particular groups with particular problems to solve or jobs to do. You stand out based on how well you help them with those specific things. So evaluate your product in this more niche way.

If you compare yourself against a wider market or generic user, it’s just broad strokes and hard to make meaningful conclusions.

Think beyond the tool
A differentiated product is more than the tool itself. Because your product is not just the code.  It’s not just the features, it’s the entire development and support ecosystem.

Perhaps you offer more user support, more reliability, faster iteration. These are things that can’t be easily replicated.

If another company copied everything pixel by pixel, would you still have a business and a differentiated product? The answer should be yes.

Defend your product: Explain why not
In some respect, part of product differentiation is explaining and defending your choices, especially when it comes to not building a certain feature.

It’s perfectly okay to have opinionated software that doesn’t jump on the feature bandwagon! And if you take the time to explain the reasons why you aren’t building XYZ, it could actually benefit your team in the eyes of the customers.

Explaining your product decisions to users:

  • Helps them feel heard
  • Shows them the smarts and strategy behind the tool
  • Reveals other avenues for solving that problem or satisfying that use case
  • Builds trust in your product

(This is also a polite way of saying “no” to your customers when you’re sure you won’t build their request…at least not right now.)

4 ways to check your product differentiation is on track

Talk to users however you can
Figure out what other tools they have considered or are considering. Figure out what processes they had before they bought, or what they’d go back to if they cancelled. This is very much like finding product/market fit all over again, which is appropriate given PMF is a moving target.

Talk to the people in limbo
The customers who tried the product but didn’t buy. The trials that fail to convert. The people lingering in your drip campaign, subscribed to your emails but not your product. Ask them what they think! This contingent of users (or almost-users) is often overlooked by teams, but they have a wealth of knowledge.

Collect feedback from company surveys
Some practices like Net Promoter Score surveys or “exit interviews” with cancelling customers can yield helpful information, too. Of course you should check these results for any insight about the product’s perceived usefulness. Ideally you could ask churned users directly, but the thing is — they usually don’t want to talk to you. Worth a shot, though!

Come back to the roadmap
The roadmap is the prototype of your strategy. It can keep you focused on the long game, but also facilitate the conversations and pivots along the way. To keep a strong company-wide footing in your product strategy, it’s crucial to have a roadmap that everyone can understand.

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