This post was originally published on January 17, 2024 on LinkedIn

Have you ever been caught off-guard in a business meeting, faced with a question that left you feeling like a deer in headlights? I've been there.

I was in a meeting years ago with my company's CEO, who asked for the business case of a new product I was managing. My eyes grew wide – I hadn't prepared one. In my eagerness to launch the product, I overlooked its potential impact on our company. 

Big mistake.

That was a learning moment for me though. And since then, I've made it a rule to always build a business case for every new venture.

The Power of a Business Case

Having a solid business case is crucial when you're seeking support and resources within your organization. Without it, even your most promising growth plans can hit a roadblock.

This becomes especially vital when you want to introduce something new and different that will set you apart . A well-crafted business case can be the key to bringing these unique ideas to life.

Is Differentiation Really the Key to Growing a Business? 

During a recent conversation with a marketing executive, I was asked, "Differentiation inherently feels right, but it's abstract. How do you show its business value?"

Great question!

While every situation is unique, thereby requiring a custom business case, there is a high level statement that I use to set the stage:

Successfully using a differentiation strategy positively impacts a company's performance, mainly through enhanced customer loyalty and increased pricing power.

But as we all know, there is no business case without numbers. So while this statement rocks, let's dive into the data.

The Business Case for Using a Differentiation Strategy

• Impacting Company Performance: A recent study found that around 44% of a firm's performance can be explained by its successful implementation of its differentiation strategy. For comparison, a low-cost strategy came in at around 31%. This means that not only is there a positive relationship between the use of a differentiation strategy and a company’s performance, there’s also a higher potential rate of return on efforts to differentiate compared to being the cost leader. What’s driving that incremental performance? Customer loyalty and pricing power.

• Enhancing Customer Loyalty: It’s no secret that customers form emotional connections to differentiated offerings, leading to greater loyalty. One study reveals that 82% of emotionally engaged customers consistently choose the same brand. This loyalty translates into very real benefits – customers with emotional connections exhibit a 306% higher lifetime value (LTV) and are more likely to recommend the brand.

• Increasing Pricing Power: Lastly, differentiation directly impacts pricing power. Research shows that "meaningful difference" accounts for 94% of a brand's ability to command higher prices. In other words, when consumers feel connected to a brand and believe that it offers something that others don’t, they are willing to pay a premium.

Ahead of the Headlights: The Tangible Benefits of Differentiation

Differentiation strategy is a powerhouse for business growth, largely due to its impact on company performance, customer loyalty and pricing power. While many of us may initially explore a differentiation strategy because it “feels right,” rest assured that the data exists to support our case. As leaders, we must always be prepared to show the value of our initiatives, especially when we believe it will grow our business.