“That’s a dumb differentiation,” was what one bootstrapped founder said to another after both their investor pitches plummeted.

Differentiation, the unholy grail of product marketing, shows that most people have unrealistic notions about what it is. In pure form, differentiation is anything that makes your product different. In practical form it is the difference that causes people to buy your products and not ones from your competitors. Just because your product is different doesn’t mean anyone wants it.

Indeed there are three basic things that can be called differentiation. A product or feature can be different from everybody else’s, it can be better or it can be new. Yet, just because your product/feature is different doesn’t mean anyone wants those differences. Just because your product/feature is better doesn’t mean that people need it to be better, or you may not be ‘better enough’ to motivate customers switching to your offering. And new products (say pink men’s Speedos) might be a new thing, but it is doubtful you will sell many units.

You must create differentiation that matches the desired, unmet and often unknown outcomes of your target customers. The overlap between what they want to accomplish and how your product is different is where sales begin. All too often, techie founders will dream-up differentiations without sound insight into the precise customer desires and degree of demand for them. In some cases the invention/feature imprecisely matches what customers want. Other times the match is precise … for the 37 people that want that particular feature.

Either inaccuracy means wasted effort for no reward.

Two market research steps create solid foundations on which to build products. Qualitative research seeks to understand what customers may want. My particular favorite approach are deep interviews with non-customers (interviewing content customers often yields nothing). Trained interviewers detect points of customer frustration, and then guide the conversation to explore the source of the angst. Once a point of motivation is discovered, surveying determines if enough people share the same frustration and want a similar solution. When done in this order, creation of differentiation is almost automatic (though we always suggest testing proposed product/feature solutions to assure it is architected correctly).

It isn’t enough to have differentiation. It has to be meaningful, otherwise your company won’t be.