Using The Four Pathways Of Differentiation To Set Your Business Apart

Imagine being able to start your career at a large big brand business, taking everything you learn and implementing them as a top regional ad agency, and then being able to take all of these lessons from small and medium and large businesses and implementing them into your dream business. Welcome to the Magnetic Marketing Podcast. Today we get to listen as Dan Kennedy interviews Sarah Petty. This is Sarah Petty's entire journey from large to medium and small, all the way down to her current business. Sarah is going to share with you the 4 key paths to differentiation: product, price, process, and place. And using all 4 of these, you can become truly differentiated by doing just one thing— becoming a boutique. Let's listen in.

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Welcome to the Magnetic Marketing Podcast with your host, Dan Kennedy. Glad you're with us. I also have with us a guest who we will get to in about 15 minutes or so, Sarah Petty, co-author of the book Worth Every Penny: How to Thrill Your Customers and Still Charge What You Are Worth. And so she is with us waiting in the wings. I have a quick— as you know, the theme— well, as you may or may not know, the theme of this month's call is differentiation. And one of my favorite quotes from Adman Jack Trout, differentiate or die, truer than ever. So let's run through a quick review of the key categories of pathways to differentiation. And there are 4. They are product, price, process, and place. And so product, of course, is where most people sort of stop in all this and— or get stopped in all this. And they look for a unique selling proposition inside the product they have on the shelf, the service they already provide. And it is not impossible to find it there, but it is often difficult to find it there. Many times they find it by combination of product and place. One of the place strategies has to do with change of market. And so if you look at what appears to be product changes, they are often not. They are merely change of market. Nutrisystems for men is a key example of that. There's very little difference in the product itself, but the market it is positioned for, they are really the first ones ever. Weight Loss— Weight Watchers is making an attempt right now, but Nutrisystems is really the first company ever in the history of weight loss to succeed in any way at aiming a program and a product at male customers, and they have got traction there. But again, if you think about that as a product change, It really largely isn't one, but it is a perception of product change because of who it is aimed at. Similarly, we have several members who are chiropractors who do a good job of promoting in their markets chiropractic for golfers. Again, in truth, the actual chiropractic treatment for, in this case, flexibility relief of joint pain, etc., for golfers is not different from the chiropractic treatment for somebody with joint pain who has never picked up a golf club in their life, but it appears to be a product change. So one point of differentiation is obviously we can change the product, we can appear to change the product, we can private label or package the product, differently. If you look at the skincare business where I do quite a bit of work, often the product change is either the celebrity attached to it or one ingredient in the formula for which there is a magic story. And in reality, the rest of the product, skincare glop is skincare glop is skincare glop. I sent a kind of a snarky fax to my friends at Guthrie Ranker. I just saw the new skincare show they've done for— now I forget the celebrity name's product. Isn't that awful? I forget it. But the product difference is that it's made— it contains ingredients from some magical melon only found in the south of France, and the proof that that's a significant product difference is that unlike any other melon, if you cut this melon open and you let this melon sit on your kitchen counter, it does not spoil. Which my fax to Guthrie Ranker was that that's also true of Twinkies. So they don't spoil like in 100 years, so maybe we should make skincare products out of Twinkies. But again, if you look at skincare product after skincare product after skincare product, whether you look at those sold by direct response or you go to a cosmetic counter in a department store, more often than not what you're going to find is that the product difference is one ingredient that has a story. The second category of pathways to differentiation is price, which usually means going up or going down. Right now, there's a very visible, I happen to think ill-conceived, but the jury is out ad campaign for JCPenney trying to reinvent themselves in much the same way that Saturn attempted to position themselves with automobiles, which is no coupons, no discounts, no doorbusters. For Saturn, it was no price haggling, no negotiation, uh, sticker price is sticker price is sticker price. So for Penney's, it's sticker price is sticker price is sticker price, and they are alluding to the idea that they have, uh, the lowest prices anyway, all the time, without having to get up at 4 o'clock in the morning or clip coupons or whatever. Now Walmart has already abandoned that lowest-price leader position some time ago. Being unable to preserve fulfillment of it. I think it's, I think it's ill-conceived on Penny's part, but it nonetheless is an example of an attempt at differentiation purely by price. If you go way up, you have, for example, in the mattress business, you have mattresses that sell for $35,000. If you go way down to— you can't go further down than free, As most people know, I'm usually not a big fan of free, but there are times. Earlier today, as most of you know, today when I do the Diamond Calls, that is my call day. So I've been on the phone with private clients since 7 o'clock this morning, and we'll be on the phone with them again after this call until 7 o'clock tonight. And one I spoke to in the front end of his information business and seminar business He switched from a low-price introductory seminar to a free introductory seminar and immediately went from struggling to fill his room to having 500 register and 200 attend, which is about par. And in net, net, net terms, at conversions, far, far ahead of where he was. Trying to qualify the prospect by putting them in the room with a paid ticket. So price strategy as differentiation can go all the way from being the highest price to being the lowest price to being uniquely priced to being differently priced. Third, we have process. And of course, process is one of my favorite pathways to differentiation because it really gets to marketing process and sales process. If you think about deliverables, probably the biggest process change of recent years that has revolutionized the business has been in the book business where you have switched from a process of delivery, sale and delivery from brick and mortar to Amazon and then finally to the sale and the deliverable are one and the same within Kindle. And for Amazon customers late last year, the number of books, of Kindle books sold equaled and slightly surpassed, a ratio of about 105 to 100, their sales of hardcover and paperback. If you think about sales processes, you have Harley-Davidson adopting Tupperware's process and doing garage parties to sell motorcycles to women. One of my favorite examples. You have sales processes really to switch from a preview seminar in a room to a webinar and then live webinar to automated webinar. And of course you have our complicated multi-step multimedia pre- and post-sales event processes. A process you're familiar with probably from me is what we call the appointment no sale letter.— which actually is a sequence of letters— which occurs in any sales environment where there is a face-to-face appointment, so dental office, chiropractic office, hearing aid center, auto dealership, etc., etc., there's an opportunity for follow-up to those who go through the appointment, go through the sales event, and do not buy. And often their value is grossly underestimated of what can be recaptured by process. My own experience with this is that somewhere between 10 to as much as 40% of those who came through an entire sales process all the way to a face-to-face appointment and did not buy can be recaptured with process put in place after that appointment. And then the final category of pathways to differentiation is place. Under place, there is, of course, geography itself. There is market. There's media. And there are lists. And one of the great opportunities is the unobvious versus the obvious. And so at both of the last two classic car auctions I've been to, Tempur-Pedic Bed has had a large temporary store in the exhibit area, which is dominated by auto-related exhibitors. And so there's no product reason for them to be there, but there's a profound market reason for them to be there. Which is affluent customers who can essentially afford any price that they might command for a bed, and a related place media to be there, which is a lot of affluent customers who over a 2 or 3 day period of time are likely to walk the entire exhibit area because of fascination with the car-related exhibits, and they are there as the only one in their category with an opportunity to talk to those people. So it's really a very shrewd play strategy on a couple of levels. There's the issue of consumer to B2B and B2B to consumer. I had a long conversation a couple days ago with the marketing director for a collection of all-inclusive resorts in, in the Caribbean and high-end all-inclusive resorts in the Caribbean. And they are largely focused— some 40% of their business is B2B, not consumer. It is the sale of packaged reward trips to companies for their top salespeople or their top agents or their top franchisees or whatever. So even though they are in the Caribbean resort business, they are a B2B marketer. That's their place rather than a consumer marketer, and they're very effective at it, and they have less clutter and less competition in doing it, and they have a much smaller universe of potential prospects to talk to, so they can invest more in getting to each prospect. So those are the key categories in which we can find pathways to differentiation. So Sarah Petty, very impressive, as is her partner. I've appreciated working with them and am very impressed with their work. Her new book coming out, I'm not sure if you can advance order it at Amazon or not, but her new book coming out is Worth Every Penny: How to Thrill Your Customers and Still Charge What You Are Worth. Sarah is the founder of The Joy of Marketing, and she comes from beginning her career in the marketing department at the world's largest brand, Coca-Cola. Has operated a top regional ad agency, done a lot of direct marketing as well as brand campaigns for small and medium-sized companies, and walked the walk in her own business. She opened her boutique photography studio and was quickly named one of the most profitable photography businesses in the country after just 5 years in business by the Professional Photographers of America.. And her book is really all about a boutique approach to differentiation. So Sarah, thanks for taking time today to be with us. Oh, thank you for having me. And let's just start with the idea of boutiquing, if there is such a verb, or boutique marketing. Has a point of differentiation. And, you know, you say boutique is a business model, not a gift shop. So let's have you talk a little bit about it as a business model.

Yeah, so we kind of talk about the boutique model being a filter through which you make decisions. We see so many small business owners from, you know, we're in the photography industry, but at the ad agency we worked with every kind of business, as do you. And you see these people doing so many things right. They have a unique skill or unique talent and their products are superior, whether they're cooking in a restaurant or, you know, an artisan making jewelry or services or whatever. And then they panic because they don't have business and they go out and they deep discount or they Groupon. And so it's where all of the decisions that you just talked about, the pathways to differentiation, need to all be consistent if you are Talking about the boutique business model.

And correct me if I'm wrong, but the boutique business model is really as much about what you aren't as what you are.

Is that fair? Yeah, definitely. And I think a lot of people think about, you know, in the photography industry now, everybody is a photographer. So the amateur at the soccer game is a professional photographer. But in some industries, you know, it's Walmart, or there's always somebody doing it cheaper, and I think that's what we— need to stay clear that we are not.

So when you— so a retailer is, as you mentioned, Walmart is looking at, you know, big box retailers. An independent restaurant is looking at the restaurant chains around him. A financial advisor is worried about the big financial product companies advertising on TV. So there's our dichotomy. What's the big difference between the way the big entities and the mass marketers approach business and the way someone using a boutique strategy would approach business?

Well, if you want to start with price and work backwards, a lot of it is that they attract people with low prices. They get them in and they— the products go out. You know, that's how they get people in. Whereas on the other side swing side of the pendulum. A boutique business is based on relationships and the strengths we have as a small business owner that Walmart, using Walmart as the catch-all for everybody discounting and that has that high-volume model, the things that they can't do. You know, you walk in the door at Walmart and they say, "Hi, welcome to Walmart." But when my clients walk in the door, I can say, "Hi, Mary. Hi, Bill." I know their names. I have those relationships, and they're working directly with an expert staff, people who are knowledgeable, who can answer every question inside solve every problem. So it's high-level, high-touch, completely opposite of the low-touch, very mass bland products. You know, they have one of everything. They have the most popular bike, you get two choices. But you go to the bike shop and you can get a bike for tall people, short people, long-distance bikers, mountain bikers, you know, any kind of specific thing you need, you go to the bike shop and you get the expert opinion. From the people with the great products that are customizable and, you know, a person there that can answer every question and solve every problem that you have.

Well, so important things and in some cases I'll use different language than you'll use but we're in the same place. There's expert positioning. There's a diagnostic and prescriptive sales process. So in the bike analogy you just gave, I mean, you really are talking about off-the-shelf bikes with a seat that adjusts 3 ways or a diagnostic and prescriptive consultative sale. But this begs the issue, I think, of also who you bring through the door and who you are trying to bring through the door. So does the boutique approach now place some sort of mandate on who we aim at as well as how we do what we do?

Say, I missed the first part. Who we attract?

Is that what you said? Yeah, who we aim at.

Oh, who we aim at. Well, yeah. I mean, there are— different people value different things. So say you're selling diamonds. There are some people that will pay a fortune for diamonds because they value diamonds and they want the fanciest, best diamond. There are other people that could care less about diamonds. They're just, the cheap diamond half off at the mall, they're gonna run in, they're gonna get that diamond, they don't care. And so that's what the price sales, when you're attracting and building your business on price alone, you're getting price-sensitive buyers. And then tomorrow someone else has a sale on diamonds and they're running down there. So they don't have the loyalty, they don't refer you, there isn't that strength of a client that you need to build a boutique business. Which is why everything we teach and believe in is, is about attracting that right client because that's how you build a brand that's worth more.

So we'll get specific just for a second then. Hey, your photography business, okay? And so what is that? How does that look differently than other photography businesses? And then most importantly, how are you attracting the right customer for your boutique business?

Okay, good question.

So yeah, and I want it in the 3-minute version.

Okay, yeah, yeah, yeah, the 3-day seminar. Well, for me, as far as the business model itself, people come in, we do a consultation, we plan their session, everything's custom, we hold their hand through the whole process, everything leaves archivally framed, hand-painted frames, completely custom. So of course the price is is much higher. So if I use Groupon or something and I attracted people in based on half off, they still would be shocked probably at our prices. So to attract the right customers, we do it in a more organic way without just trying to get them all in at once. You know, we have a great database. We keep in touch with them. All of our direct marketing pieces have bells and whistles. So we're very anti-postcard, cheap, down and dirty. So it's like a restaurant fancy restaurant going to a food show and sampling peanut butter and crackers, you're giving people the impression that you are something that you're not when you send out a cheap postcard if you have the boutique business model. Our promotional pieces, they're gorgeous papers. They have die cuts. They spin. They jump. They dance practically. It attracts the people that say, "Oh my gosh, I love what you do." We bring them into a system. We pre-qualify them on the phone. We have a lot of high-touch time with them throughout the process. And we ensure that when they go home, they have something that they cannot possibly get anywhere else. And that's how my entire business was built.

Now, somebody who's astute and transcribed that and busted it up into items, there's a real strategy there that combines the right who with the right process with the right product. Chapter 4 in your book, always dangerous to say one chapter is better than the others, but Chapter 4, which is Making Boutique Products and Services Worth More, I think that's, you know, where a lot of people get hung up is that they just insist that what they do is the same as what what everybody else does. And they create that box for themselves, and then once they're in it, they don't have any price flexibility. And you've got a couple of great stories in this chapter of essentially mundane businesses. And I wonder if you just rattle off a couple of what people would consider to be ordinary businesses who are managing to boutique themselves.

Sure, sure. So hot dogs. Do you think of hot dog as a boutique product? We all have them at the grill outside. Well, Maui Dog is a restaurant in Phoenix, Arizona, and they offer toppings like mango, chipotle, garlic mayo, and banana.

They—

what else do they do? They bake pineapple into the bun. And so you go there and you get an unexpected experience, just unbelievable. Well, you know, compare that on the sub sandwich side to like a Subway where everything's processed, you know, it's inexpensive, it's quick, it's the same old, same old. But wouldn't you pay so much more for a Maui dog? I mean, I would, and I don't even like hot dogs. White House Custom Color is a photography lab in our industry, and the lab business is really changing because of the digital, even though they're a digital lab, but they go out and find products for their clients. So they do, photographers wanted bags to deliver their framed portraits, and so they hired a seamstress to custom sew bags. They even created a large printing press print on fabric. And they are getting to soon a point where they can, we can supply a design. So we could design a bag or a background or whatever, send it to them, they print it, and then we have something unique. Everything is very customizable. And then a third is Hound Comics. They are a comic book company. And in this day and age, especially with all the internet and apps and games, the comic book industry is way different than when we were kids. And so they invest on a gorgeous page stock and the design and all of the details that it does drive up the price of their comic book, but their readers are so loyal because they appreciate the attention to detail and the thick paper and the thick, you know, the gorgeous artwork and all of the little details that you typically don't find in the cheap flimsy comic book.

If I'm not mistaken, they're also a scarcity exclusivity player in that they only produce a limited number of limited editions each year, right?

Yes, and I believe that too, that they're only at Barnes Noble. So they're not just in everywhere. They have that exclusive distribution channel, which makes it, you know, a little more appealing too.

All right, so the last topic in our time together I wanted to, to kind of pull from the book and talk about a little bit is— and, and God bless you for saying it, because it is a lot of the mix of the missed element, I think, is you say you and your team must be able to sell and that selling skills are more important in the boutique model than anywhere else. And it's my observation that we've gone through a period of time pre-2008 or 2009 of nearly a decade where there was so much money running upstream that people really didn't have to sell. They really could stand around and be order takers. And now that's catching up to a lot of businesses and a lot of companies in a big way at high speed. And so, you know, I'm on people all the time, not just to, hey, I want a better ad, or B, I want to make the phone ring more, or C, I want to get more people through the door. But to really focus on what happens when you finally do get an opportunity with a customer. And so, talk a little bit about how you view the importance of selling, period, and the importance of selling in the boutique model.

Yeah. Most small business owners, they think sell is a 4-letter word, right? We always make that joke. But what I see is people are scared to sell. And we work with creatives, and I think a lot of boutique businesses, they are creative. Even if they're in the financial sector or whatever, they have more attention to detail and they care about those little things. And the way I look at it is when someone comes to me and they want photography, they're already saying, I have what you need. So I'm doing them a disservice if I don't create something amazing for them. And what's great about the boutique business model is I don't have 3 choices that I have to push I need to get 20 of them at today to make my quota. It's all custom, so I get to use the sales process the way it's meant to be used. It's not all about the close. It's about the beginning. It's building rapport and asking a lot of questions, doing that needs analysis, because people just know they want portraits. They want photography. They don't know if they want a book or an album or a wall portrait or digital. They don't have any idea what they need. It's my job to get to find out what they need so that I can create it for them. Then that closing the sale becomes very easy. I think people are scared of that being pushy or salesy and having to put high pressure on people when I think as a boutique philosophy, if we do our homework and our work up front and we build rapport and we get their trust by showing them how we're experts and what we do, the sales become fun and easy. We're not afraid to call them up in 6 months and say, hey, you mentioned you wanted a family portrait when your kids came home from the summer, you know, came home from college for the summer. We've got about 3 weeks of gorgeous weather. Let's get you scheduled. Instead of just like you said, ads trying to get more and more and more people, let's take care of the people we have. And that's where the big potential is in a boutique business is with your database. More products, giving them love. When you do that, they will refer you and that will build the right kind of business.

Well, the great line is the sales process used as it was intended to be used. You know, most people view it as a how fast can I present choice A, B, or C and close a sale, where it really can be so much more constructive. Than that. In your own business, the last thing I want to ask you is about how all this translates into referrals and what you do and what you advise the photography studio owners in your niche that you work with to clone and multiply your customers.

Well, sure. The first thing I ask people is, are you getting referrals already? Because if you're not already getting referrals, something might be broken. Because, you know, I built my business slowly but quickly on the other hand by referral because people are like, oh my gosh, oh my gosh, you've got to work with this person. So if you're not already getting at least some referrals, I would challenge you to go through those pathways of differentiation. Maybe your product's not cool enough or your experience or something in there is broken. But let's say you are getting referrals, then the great way to get referrals is to find a time when your clients are bragging on you to open that door. So if they're gushing about their photography and they picked it up and they just, they're in tears, or they love it, they can't love it enough, that's a great time to bring up, you know, would you mind hopping on Yelp and sharing how you feel? Because that's a big source of referral for us. Or if you have any friends. We also send out gift certificates sometimes to our best clients saying, here's a gift certificate for your best friend. And so it enables them to give a gift to someone that they know will value what we do, that knows we're, you know, they're not going to be price sensitive, and they know we'll take really great care of them. Cool.

All right folks, that's going to wrap it up for this month's Diamond Call. I hope you agree that it was a good one.

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