Very often engineering types can only think of differentiation in technical terms. I think I can say that, in practice, at least in mature markets, differentiation is more about positioning and marketing rather than almost anything else. Easy examples:
- Cars
- Bottled water
- Computer monitors
The vast majority of automobiles produced today have reached a level of design and manufacturing maturity that makes them pretty much equally reliable and equivalent. The days of a Porsche or BMW being markedly better than a Toyota or Nissan are gone. Sure, we can point at the extremes and find differences, but I am not talking about that, I am focusing on what the vast majority of consumers look for or need in a car. Today you could pick any vehicle almost blindly and not make a purchasing mistake. That was not the case a few decades ago.
How do they differentiate and sell you cars then? Branding, positioning, marketing. They sell the feeling of owning the car rather than any true technical differentiation, because those really don't matter as much in non-technical markets.
Bottle water is another case. I'll generalize and say that most bottled water is pretty much the same. Or, let's put it another way, no bottled water has magical properties that make it significantly better than the others.
Again, marketing. They are selling you an image. In some cases it's a glass bottle with a different feel or a social mission. The product, however, that thing you drink, most of which you are going to urinate, is basically the same. If you position the product well you can command much higher pricing than the competition.
Computer monitors fall under the same category. Nobody cares any more outside of those using them for very specific applications. There are only a few companies who make LCD panels. Every single computer monitor buys from them. So, if you buy a 24 inch HP vs a Dell monitor they very likely have exactly the same LG or Samsung panel inside. They might even share the rest of the electronics. For most computer users these products are perfectly interchangeable; they just don't care because it makes no difference at all.
Not sure how computer monitor makers differentiate their offerings any more to the masses. Sure, there are folks who are more comfortable with one brand over the other (despite the fact that it might actually be exactly the same product inside) and, of course, there's pricing. This is one example of the fact that significant differentiation might not always be an absolute necessity in order to have a successful billion dollar business.
One area where they do differentiate --although consumers never see it-- would be in the terms and relationship they have with distributors and retailers. This is a big money play. For example, HP could drop two million dollars of inventory into Best Buy warehouses, effectively on consignment, and get paid based on what is sold. Best Buy, will, of course, push those products because they represent pure profit without any capital investment to speak of. This is a distribution chain differentiation that drives sales rather than differentiation to drive consumer behavior.
Books have been written about this topic. I've read a few of them over the years. Still much to learn.
Absolutely agreed, but I think part of what distorts this perspective for tech products is often the influence of VC. If you need to convince investors that you’re lined up for explosive growth, something like “we’re Tinder with branding that captures a different market segment” is probably a less compelling story than “we’re Tinder with an AI gimmick that will crush our competitors, burn their villages, and salt their fields”.
Also, totally unrelated tangent, but I hate the way internet discussion makes us go to absurd lengths to qualify statements as a preemptive defense against pedants. Like, for the purposes of this discussion you’re 100% right that all bottled water is functionally identical, but you still have to couch it in “I’ll generalize” and “most” and “pretty much”. I do it all the time too and it drives me nuts.
To address your unrelated tangent, as a pedant (as I think many techy types are), I personally appreciate the extra effort put in to qualify the statements.
Your "you’re 100% right that all bottled water is functionally identical" makes me bristle.
I only drink tap at home, but I know that bottled water is drawn from very different sources, and certainly some has quite different taste and taste is certainly a function of water </pedantic>
Fortunately you yourself mounted an effective defence against pedantry by qualifying that with "for the purposes of this discussion".
I think the marketing differentiation works best when it is driven by factors that are hard to measure and control, but that are perceived as high value, like flavour and style. When buying bottled water, the water is free, you're buying the bottle, the refrigeration, then real-estate & inventory space, and you can compare it on those dimensions, but if you are sensitive to the taste that can override the other factors. With cola it is much much stronger because the taste is more intense and your body is conditioned to link it to the sugar and caffeine hitting the bloodstream which gives you that immediate Pavlovian response. But taking something low-cost and using human psychology to assign a high value is how marketing makes profit. As opposed to the prosaic side of marketing where you're just letting people know you exist.
> but if you are sensitive to the taste that can override the other factors.
I can taste the difference between certain bottled water brands and that really is the number one concern for me. The differences are much less apparent to me with spring water than in the filtered tap water brands like Dasani and Aquafina (who often add salt and other minerals). For spring water brands I try to buy ones that aren't owned by Nestlé but that's not because of the product itself.
> Today you could pick any vehicle almost blindly and not make a purchasing mistake.
Wrong. Cost of ownership varies wildly across brands, and reliability is still not a given.
Beyond the purchase price, which often sucks people into making poor buying decisions, fuel economy, parts and servicing, complexity, durability, tax, and depreciation all make a huge difference to cost of ownership.
Finance deals are structured to make cars seem affordable, but that's only a part of the TCO.
If you're unwary, it's very easy to overstretch yourself and buy a car that ends up owning you (new or used).
It's way too easy to overspend on a car (almost any new car), that's definately true.
But, I think he meant in terms of car capabilities: features and amenities. They all have decent acceleration, AC, heating, windshield wipers, electric windows, defrosters and hundreds of other features, even on some of the cheapest cars (new cars). car capabilities are far greater than most people will ever use.
Eh, all cars meet minimum safety standards and will get you to and from wherever you want to go, but they aren't equivalent. Just like I could probably go to the supermarket and buy any random item from the butchery department and cook it and it would stop me from being hungry for the night but I definitely wouldn't say that food items from the butchery department only differ in "branding, positioning, marketing" though. Likewise those are not the only things that matter in the car market.
That’s positioning and marketing too since you don’t really need the performance. For 99% of the time you use the car they’re about the same. If only life were all twisties and race tracks, but in reality it’s mostly traffic jams.
> Sure, we can point at the extremes and find differences, but I am not talking about that, I am focusing on what the vast majority of consumers look for or need in a car.
wrt. Cars, there's a whole can of worms which IMHO matters to every car shopper (whether they think they care about it or not): Ergonomics. Every driver may have their own preferences on where important controls (pedals, steering, AC temperature, volume, etc.) should be; every passenger (including the driver) may have preferences on the hip point, seating position, interior material, etc.. In reality these are (rightfully) widely differentiated across models and makes.
Not really, not if you are looking at averages; which is what I said in my post. A US $250K fire-breathing Porsche is in a category of it's own.
Interestingly enough, one of my cars is a Toyota GT-86. I actually chose it over a Porsche 911. I could have bought the 911. In fact I visited the dealer and was ready to commit. On my way back home I drove by the Toyota dealership and decided to go take a look. I left with the Gt-86.
Why?
The car was fun to drive. It handles very well (I've taken it to the track). And, here's the clincher: I don't have to worry about it one bit. Cost was not an issue. Yet, when you have an expensive car in a place like Los Angeles, well, one could make an argument it isn't the best idea. I was after a fun-to-drive sports car, not a daily commuter. The GT-86 filled that role just fine at a fraction of the cost. If I trash it at the race track I can buy three more before I spend what the 911 would have cost.
Not a perfect comparison but perhaps an interesting perspective.
Imo, engineering types usually think about technical differentiation because they can potentially be good in it. Usually marketing/branding is very expensive and not very accessible for the average bright founder+engineer type.
While I agree wholeheartedly with your core point, it's worth noting that (for example) not all car manufacturers make 4WD/AWD vehicles. Even fewer make all-electric vehicles. Even fewer make vehicles that are both 4WD/AWD and all-electric. So there's at least some degree of technical differentiation there.
You can do the apple thing, but imo that's more than just marketing abs branding. To be a startup though (work radical growth) it's likely you'll be able to do and sustain that only with marketing and branding as a differentiator. Imo.
There are no magic pills though. The best thing is to read and learn from a lot of perspectives and then start to navigate the waters you happen to be sailing. No two markets or products are going to be the same. In fact, the same product will require a different based on where it is in the adoption/maturity cycle.
One category that's missing on the left is "Parents." There's Tinder for parents (Peanut), Birchbox for parents (multiple subscription boxes). It would be interesting to think about what Uber or AirBnB for parents would be.
I couldn't read the article though because I got that absurd uncloseable newsletter subscription screen. That was one of the most user-hostile things I've seen on a website lately.
So Tinder for parents is a terrible idea. (Full disclosure: my wife's a Peanut member. She's been meaning to uninstall it for a while.) Think about the key observations that made Tinder take over the dating space: people are basically superficial and judge who to go out with based on looks alone; people have spare time to flip through photos; people want to be casual and not invest too much in a date before getting to know them. These are the exact opposite qualities that you want in a mom-friend. When you're a new mom you're probably not looking your best, and putting up a profile picture isn't high on your list of things to do. You don't give a shit what your mom friends look like, and once you're reading through text it's more like "Facebook for moms". You have very little free time to swipe through profiles, and when you do, you want your mom-friend-relationships to count.
There's a lesson there for people who want to phrase their startup idea as "X for Y". You should ask how similar Y is to the userbase that originally made X popular, and whether you are capturing the qualities they have in common or just randomly cargo-culting a successful product. "Flickr for video" works because a photo-viewing community and video-viewing community are substantially similar: they both have similar casual interactions around shared multimedia, and they both benefit heavily from recommendations, discovery mechanisms, and social sharing. Similarly, "Google for China" works because people in China have information needs too yet actual Google has an antagonistic relationship with the CCP. "Uber for laundry" and "Uber for housecleaning" are both terrible ideas because Uber's value proposition is that you can get transportation on-demand and it can be done by unskilled people as long as they get you safely to your final destination, while both housecleaning and laundry are stuff you do once a week, on a planned basis, and you really want to trust the people who are doing it. "Uber for grocery delivery" (Instacart/UberEats/DoorDash/Postmates) is a decent idea, though, because grocery delivery is also something you want on-demand, do regularly, and can be done by basically anyone.
I found the best thing about Tinder when I used it was that by stripping down information and interaction to the bare minimum, it gets people face-to-face quickly with few established expectations, which is the best way to get to know anybody. There is so much about a person you can't learn through a web site or an app, and conventional dating sites worked very hard at getting you to invest a lot of time and work into interactions that only gave you a false sense of knowing someone. With Tinder you just showed up thinking literally only "I have seen a couple of okay pictures of this person and they thought my pictures and two lines of text seemed acceptable as well" which really set expectations appropriately and let you schedule a lot of dates without feeling disappointed about the outcome.
I can see that making a lot of sense for parents. The last thing they need is another high-pressure, high-judgment thing in their lives. Much better to meet someone and feel like it's no big deal if something doesn't click on either side. At least that sounds plausible to me.
Oh yes, I agree, Peanut is terrible. I recently moved to a new area and left all my mom friends behind, so I was desperate for a way to find new ones, but it's useless. There needs to be an OK Cupid for moms.
me being stupid but I actually thought flickr for video would fail because video takes more work than photos to create and because it takes more time to view them. clearly I was wrong
Do I have any of these "realms" wrong? It seems the best startup idea would be one that adds a new "realm" rather than rinses and repeats for another direct object.
Uber for = simplify a process that involves transporting or delivering something somewhere
Tinder for = rate/advertise/connect some product nearby
Birchbox for = periodically refill a perishable or consumable
Airbnb for = locate and book some experience or resource
I think you are trying to define a taxonomy of such services based on the nominal/advertised proposition to end consumers.
I'm not sure that's the right way to quantify the startups themselves, as the business case is sometimes only tangentially related to said proposition.
Uber for X can also mean “connect the user with independent contractors, or at least people we insist are independent contractors so we can pay less taxes and push the costs for things like insurance, consumables, and equipment maintenance onto them”.
I mean the way you make oodles money is taking market share (Uber) or creating new markets (AWS). Both are valid strategies - either take someone else’s customers or create a new way for people to spend money.
this. While it's an interesting article and thought experiment, I don't think anyone should be discouraged from trying to build the next ride-hailing, dating, or couch-surfing platform simply because others have already found success in it. Competition makes the world spin, and in the grand scheme of things, we're only just beginning.
I think when you make the world's first couch-surfing app you can plausibly tell your self that you are changing the world. The world goes from not having couch-surfing apps to having one.
Creating a second couch-surfing app with the idea of out-marketing the first doesn't inspire the same sense of purpose.
Reading the article and trying to think of different startup ideas. Gets a non-closable (AFAIK) modal that covers the whole screen force you to go back. Maybe a startup idea that helps entrepreneurs grow without adapting to bad UX behaviour is a great idea that needs attention
"Airbnb for Gamers" according to the infographic isn't taken. Any potential there? Letting people rent out their physical gaming rigs to other people in the area, in their homes. Seems like it'd be pretty easy to set up.
I could see it be kind of like gaming cafe's in Asia, except you'd be renting a rig in somebody's actual home. I don't know if there'd be any market for this, but it seems like it wouldn't take to much to whip up and to a trial run in a city.
Nobody wants their hands to touch someone else's booger and cheeto dust coated peripherals, or vice-versa. There have been some times recently where I'd have paid money (but not much) to test drive computer hardware before buying it, but to some extent you can do that by purchasing from places with a liberal return policy.
Speaking of test drive, I'm in the market for a car and would love to be able to actually test drive some of the contenders without having pushy sales people all over me and in my voicemail for the next 2 months. Opportunity?
Turo to try cars out for a few days. The owner would probably be happy to tell you what they do or don't like as well - and perhaps sell it to you if they were looking for something else.
I suspect that, at least in places with decent internet, something like ShadowPC negates the need for such a service. I rent a top of the line gaming PC for ~$25/month, and run my games in the cloud.
With what I used to spend keeping a gaming rig upgraded, it doesn't even make sense not to rent something that's always going to be state of the art.
First time hearing about Shadow. Their site doesn't mention anything about usage limits, so it sounds a bit too good to be true. Do they have any usage limits in practice?
Maybe not an opportunity for consoles per se (see cheeto comment), but maybe an opportunity for renting games from your neighbors. Heck, I could see this being extended online in quite a unique way. Cheaper renting some movie or game from someone who already owns it...
Except that nobody owns games or movies anymore. I suspect that letting someone log on to my Steam account would potentially be grounds for a banning, and losing whatever investment I have in the platform.
Blockbuster use to rent consoles. But in general the market for that sort of service is capped by the relatively low cost of said consoles. Plus you have the problem of everything being tied to an account these days.
Maybe on the PC side you could have a guy loaning out his rig with his monster Steam library and VR setup. On a small scale this might be a modest success, but it's hard to see it ever becoming the next Uber/AirBNB.
Some local arcade/pinball operators will rent out their games, but there's no easy to use service for that. But I don't think high-cost/high-touch rentals like that lend themselves to cheap/scaleable apps.
I started scrolling around, and then an unclosable "subscribe to my newsletter" blocked the entire page.
WTF???
No, I don't want to subscribe to your newsletter. Furthermore, forcing me to subscribe to your newsletter just to read a silly post on your website is a jerk move.
Readit News
How do they differentiate and sell you cars then? Branding, positioning, marketing. They sell the feeling of owning the car rather than any true technical differentiation, because those really don't matter as much in non-technical markets.
Bottle water is another case. I'll generalize and say that most bottled water is pretty much the same. Or, let's put it another way, no bottled water has magical properties that make it significantly better than the others.
Again, marketing. They are selling you an image. In some cases it's a glass bottle with a different feel or a social mission. The product, however, that thing you drink, most of which you are going to urinate, is basically the same. If you position the product well you can command much higher pricing than the competition.
Computer monitors fall under the same category. Nobody cares any more outside of those using them for very specific applications. There are only a few companies who make LCD panels. Every single computer monitor buys from them. So, if you buy a 24 inch HP vs a Dell monitor they very likely have exactly the same LG or Samsung panel inside. They might even share the rest of the electronics. For most computer users these products are perfectly interchangeable; they just don't care because it makes no difference at all.
Not sure how computer monitor makers differentiate their offerings any more to the masses. Sure, there are folks who are more comfortable with one brand over the other (despite the fact that it might actually be exactly the same product inside) and, of course, there's pricing. This is one example of the fact that significant differentiation might not always be an absolute necessity in order to have a successful billion dollar business.
One area where they do differentiate --although consumers never see it-- would be in the terms and relationship they have with distributors and retailers. This is a big money play. For example, HP could drop two million dollars of inventory into Best Buy warehouses, effectively on consignment, and get paid based on what is sold. Best Buy, will, of course, push those products because they represent pure profit without any capital investment to speak of. This is a distribution chain differentiation that drives sales rather than differentiation to drive consumer behavior.
Books have been written about this topic. I've read a few of them over the years. Still much to learn.
Also, totally unrelated tangent, but I hate the way internet discussion makes us go to absurd lengths to qualify statements as a preemptive defense against pedants. Like, for the purposes of this discussion you’re 100% right that all bottled water is functionally identical, but you still have to couch it in “I’ll generalize” and “most” and “pretty much”. I do it all the time too and it drives me nuts.
Your "you’re 100% right that all bottled water is functionally identical" makes me bristle.
I only drink tap at home, but I know that bottled water is drawn from very different sources, and certainly some has quite different taste and taste is certainly a function of water </pedantic>
Fortunately you yourself mounted an effective defence against pedantry by qualifying that with "for the purposes of this discussion".
I can taste the difference between certain bottled water brands and that really is the number one concern for me. The differences are much less apparent to me with spring water than in the filtered tap water brands like Dasani and Aquafina (who often add salt and other minerals). For spring water brands I try to buy ones that aren't owned by Nestlé but that's not because of the product itself.
Wrong. Cost of ownership varies wildly across brands, and reliability is still not a given.
Beyond the purchase price, which often sucks people into making poor buying decisions, fuel economy, parts and servicing, complexity, durability, tax, and depreciation all make a huge difference to cost of ownership.
Finance deals are structured to make cars seem affordable, but that's only a part of the TCO.
If you're unwary, it's very easy to overstretch yourself and buy a car that ends up owning you (new or used).
But, I think he meant in terms of car capabilities: features and amenities. They all have decent acceleration, AC, heating, windshield wipers, electric windows, defrosters and hundreds of other features, even on some of the cheapest cars (new cars). car capabilities are far greater than most people will ever use.
If I'm in the market for a BMW M3, it is because it is a stellar performance car. A Toyota Camry does not fill those roles.
Deleted Comment
I'm far from an enthusiast, but even for me there are cars on the market with engines so weak that I don't like it.
Apart from the engine, there are some nice technological features on modern cars, like parking cameras or even automatic parking.
Then there are hybrid and electrical cars.
> Bottle water
Do you include sparkling water in that? Because they can taste very different.
> Computer monitor
Size. Resolution. Refresh rate. G-sync. Reflective vs matte.
Reliability wise? Sure they are not far off.
Interestingly enough, one of my cars is a Toyota GT-86. I actually chose it over a Porsche 911. I could have bought the 911. In fact I visited the dealer and was ready to commit. On my way back home I drove by the Toyota dealership and decided to go take a look. I left with the Gt-86.
Why?
The car was fun to drive. It handles very well (I've taken it to the track). And, here's the clincher: I don't have to worry about it one bit. Cost was not an issue. Yet, when you have an expensive car in a place like Los Angeles, well, one could make an argument it isn't the best idea. I was after a fun-to-drive sports car, not a daily commuter. The GT-86 filled that role just fine at a fraction of the cost. If I trash it at the race track I can buy three more before I spend what the 911 would have cost.
Not a perfect comparison but perhaps an interesting perspective.
Deleted Comment
You'd have to be legally blind not to notice the quality difference between my 200$ Philips screen and my 500$ Dell screen.
> Again, marketing. They are selling you an image.
A great example of this is Fiji water.
"Earth's finest water"
It plays on the allure that a product that comes from a "distant land" must be better than local water.
But few will ever ask for research to prove it's better.
I can't believe we are paying for water to be shipped thousands of miles, that likely has minimal benefit beyond what can be sourced locally.
But, that's the power of perception at work.
Who can?
https://www.amazon.com/Positioning-Battle-Your-Al-Ries/dp/00...
https://www.amazon.com/22-Immutable-Laws-Marketing-Violate/d...
Seth Godin is another author well worth reading:
https://www.amazon.com/Seth-Godin/e/B000AP9EH0
And a few others:
https://www.amazon.com/Crossing-Chasm-3rd-Disruptive-Mainstr...
https://www.amazon.com/Kellogg-Branding-Marketing-Faculty-Ma...
https://www.amazon.com/Differentiate-Die-Survival-Killer-Com...
https://www.amazon.com/Confessions-Advertising-Man-David-Ogi...
And, of course:
https://www.amazon.com/s?k=vaynerchuk
There are no magic pills though. The best thing is to read and learn from a lot of perspectives and then start to navigate the waters you happen to be sailing. No two markets or products are going to be the same. In fact, the same product will require a different based on where it is in the adoption/maturity cycle.
I couldn't read the article though because I got that absurd uncloseable newsletter subscription screen. That was one of the most user-hostile things I've seen on a website lately.
There's a lesson there for people who want to phrase their startup idea as "X for Y". You should ask how similar Y is to the userbase that originally made X popular, and whether you are capturing the qualities they have in common or just randomly cargo-culting a successful product. "Flickr for video" works because a photo-viewing community and video-viewing community are substantially similar: they both have similar casual interactions around shared multimedia, and they both benefit heavily from recommendations, discovery mechanisms, and social sharing. Similarly, "Google for China" works because people in China have information needs too yet actual Google has an antagonistic relationship with the CCP. "Uber for laundry" and "Uber for housecleaning" are both terrible ideas because Uber's value proposition is that you can get transportation on-demand and it can be done by unskilled people as long as they get you safely to your final destination, while both housecleaning and laundry are stuff you do once a week, on a planned basis, and you really want to trust the people who are doing it. "Uber for grocery delivery" (Instacart/UberEats/DoorDash/Postmates) is a decent idea, though, because grocery delivery is also something you want on-demand, do regularly, and can be done by basically anyone.
I can see that making a lot of sense for parents. The last thing they need is another high-pressure, high-judgment thing in their lives. Much better to meet someone and feel like it's no big deal if something doesn't click on either side. At least that sounds plausible to me.
Uber for = simplify a process that involves transporting or delivering something somewhere
Tinder for = rate/advertise/connect some product nearby
Birchbox for = periodically refill a perishable or consumable
Airbnb for = locate and book some experience or resource
I'm not sure that's the right way to quantify the startups themselves, as the business case is sometimes only tangentially related to said proposition.
So just regular airbnb?
Ideas are executed not "owned". The proof is in the doing.
Creating a second couch-surfing app with the idea of out-marketing the first doesn't inspire the same sense of purpose.
I could see it be kind of like gaming cafe's in Asia, except you'd be renting a rig in somebody's actual home. I don't know if there'd be any market for this, but it seems like it wouldn't take to much to whip up and to a trial run in a city.
Speaking of test drive, I'm in the market for a car and would love to be able to actually test drive some of the contenders without having pushy sales people all over me and in my voicemail for the next 2 months. Opportunity?
Turo to try cars out for a few days. The owner would probably be happy to tell you what they do or don't like as well - and perhaps sell it to you if they were looking for something else.
With what I used to spend keeping a gaming rig upgraded, it doesn't even make sense not to rent something that's always going to be state of the art.
EDIT: I'll be damned, according to reddit you can even do CSGO on one of these beasts. I guess that solves what I'm buying myself for Christmas
Maybe on the PC side you could have a guy loaning out his rig with his monster Steam library and VR setup. On a small scale this might be a modest success, but it's hard to see it ever becoming the next Uber/AirBNB.
So you could create a service allowing people to rent out their PCs remotely. Sort of Airbnb for Stadia.
There would probably be licensing issues, but I'm not sure how that currently works for gaming cafes.
https://fatllama.com/
WTF???
No, I don't want to subscribe to your newsletter. Furthermore, forcing me to subscribe to your newsletter just to read a silly post on your website is a jerk move.
It's also an odd move. If you have that level of credential, then you definitely don't want to be doing that!