Discovering New Points of
by Ian MacMillan and Rita Gunther McGrath
From the Magazine (JulyAugust 1997)
Most profitable strategies are built on differentiation: offering
customers something they value that competitors dont have. But
most companies, in seeking to differentiate themselves, focus their
energy only on their products or services. In fact, a company has the
opportunity to differentiate itself at every point where it comes in
contact with its customersfrom the moment customers realize that
they need a product or service to the time when they no longer want
it and decide to dispose of it. We believe that if companies open up
their creative thinking to their customers entire experience with a
product or servicewhat we call the consumption chainthey can
uncover opportunities to position their offerings in ways that they,
and their competitors, would never have thought possible.
Take the case of Blyth Industries, a candle manufacturer. By
differentiating and redifferentiating its products, Blyth has been able
to grow from a $2 million U.S. producer of candles used for religious
purposes to a global candle and accessory business with nearly $500
million in sales and a market value of $1.2 billion. Not bad for a
company in an industry that, as CEO Robert B. Goergen says,
been in decline for 300 years.
Blyths story is, quite simply, a
manifestation of the power of strategic differentiation.
Business history is full of stories of entrepreneurs who stumbled upon
a great idea that then became the cornerstone of a successful
company. But finding ways to differentiate ones company doesnt
have to be an act of genius or intuition. It is a skill that can be
developed and nurtured. We have designed a two-part approach that
can help companies continually identify new points of differentiation
and develop the ability to generate successful differentiation
strategies. The first part,
Mapping the Consumption Chain,
the customers total experience with a product or service. The second,
Analyzing Your Customers Experience,
shows managers how
directed brainstorming about each step in the consumption chain can
elicit numerous ways to differentiate even the most mundane product
Mapping the Consumption Chain
As weve said, the first step toward strategic differentiation is to map
your customers entire experience with your product or service. We
recommend that companies perform this exercise for each important
The first step is to map your customers
entire experience with a product.
To begin, assemble groups from all areas of your companyin
particular, those employees who use marketing data and those who
have face-to-face or phone contact with customers. Charge the
groups with identifying, for each major market segment, all the steps
through which customers pass from the time they first become aware
of your product to the time when they finally have to dispose of it or
discontinue using it.
Naturally, every product or service will have a somewhat different
consumption chain. However, a few activities are common to most
chains. Consider the following questions, each of which illustrates
one of those activities. Then, as the group begins to get a feel for the
special relationship between your customers and your products, ask
questions about more complex activities that pertain to your business.
How do people become aware of their need for your product or
Are consumers aware that you can satisfy their need? Are they aware
that they even have a need that can be satisfied? Your company can
create a powerful source of differentiation if it can make consumers
aware of a need in a way that is unique and subtle.
Consider the problem of differentiating an everyday consumer
product, such as a toothbrush. For many people, brushing is a ritual
to which they pay relatively little attention. As a consequence, many
brushes are used well past the point when their bristles are worn and
are no longer effective. Toothbrush maker Oral-B discovered a way to
capitalize on this widespread habit. The company, by introducing a
patented blue dye in the center bristles of its toothbrushes, found a
way to have the brush itself communicate to the customer. As the
brush is used, the dye gradually fades. When the dye is gone, the
brush is no longer effective and should be replaced. Customers are
thus made aware of a need that previously had gone unrecognized. So
far, the idea sounds like something out of Marketing 101. What gives
it particular value is that the need can be filled only by Oral-Bs
patented process. The company turned differentiation into a
How do consumers find your offering?
Opportunities for differentiating on the basis of the search process
include making your product available when others are not (24-hour
telephone-order lines), offering your product in places where
competitors do not offer theirs (the mini McDonalds outlets in WalMart stores), and making your product ubiquitous (Coca-Cola).
Making the search process less complicated, more convenient, less
expensive, and more habitual are all ways in which companies can
differentiate themselves. And when competitors cant or wont do the
sameat least, not right awayyou have the potential for a strategic
One example is the rapid growth of catalog sales in channels formerly
dominated by retail chains. Consumers now can obtain detailed, upto-the-minute information about a breathtaking range of products
over the telephone or through the Internet, without enduring the
inconvenience of visiting a showroom and the often inadequate
knowledge of the floor sales staff. The PC Connection & Mac
Connection, a company that sells computers through its catalog,
operates a 24-hour-a-day, seven-day-a-week toll-free phone number
for people wanting information about computers, software, and
related products. When a caller expresses an interest in buying a
computer system, a company representative asks a set of questions to
narrow down the possibilities to a few good candidates. The rep and
the consumer then can discuss each option in detail. What is
remarkable about this approach is that, in effect, it allows consumers
to tailor the search experience to their own needs.
How do consumers make their final selections?
After a consumer has narrowed down the possibilities, he or she must
make a choice. Can you make the selection process more comfortable,
less irritating, or more convenient? Look for the ideal situation, in
which competitors procedures actually discourage people from
selecting their products, while your procedures encourage people to
come to you. Citibank for years captured a significant share of the
college student market for credit cards simply by making it easy for
students to obtain a card while competitors made it difficult.
Can you make the buying process more
convenient and less irritating?
Another example of this dynamic is playing out right now in the usedcar business. For many potential customers, the experience of
choosing a used car is an ordealto the point where one CEO of a
major automaker observed that some people would rather have a root
canal. But a new method of selecting cars is transforming the
industry. Companies such as CarMax Auto Superstore and
AutoNation USA have targeted the selection experience as their
competitive focus. At a Car-Max showroom, customers sit in front of
a computer and specify what features they are looking for in an
automobile. They can then, in private, scroll through detailed
descriptions of cars that might meet their needs. The final (and only)
price for each vehicle is listed. A sales assistant then lets the
customers inspect the autos that interest them and handles all the
paperwork if they decide to buy one. The selling is done not by the
salespeople but by the selection process the customers create for
CarMax and AutoNation sell cars by
letting customers create their own
How do customers order and purchase your product or service?
This question is particularly important for relatively low-cost, highvolume items. Can a company differentiate itself by making the
process of ordering and purchasing more convenient?
American Hospital Supply revolutionized its industry by radically
simplifying the ordering and restocking process for such products as
bandages, tongue depressors, syringes, and disinfectants. The
company installed computer terminals at each hospital and medical
supply store with which it did business. The terminals connected
those customers directly to the companys system, allowing direct
drop shipment and automatic restocking whenever supplies fell below
a certain level. Hallmark uses a similar approach for its greeting
Many companies, including ice-cream makers and pet-food
manufacturers, are also using this method to stock supermarket
shelves, reaping the benefits of preferred access to these crucial
outlets as well as of superior displays. Another, more subtle benefit of
this form of differentiation is that it imposes a switching cost on
customers that might be tempted to try another supplier. Once
customers have signed on, it is expensive for them to switch; this
deterrent creates a barrier to competition and, once again, a potential
strategic advantage for the supplier.
How is your product or service delivered?
Delivery affords many opportunities for differentiation, especially if
the product is an impulse purchase or if the customer needs it
immediately. Lets return to our catalog computer dealer, the PC
Connection. Customers can call its toll-free number as late as 3 a.m.
to receive next-day shipments of items in stock. How does the
company do it? The amazing turnaround times are possible because
the warehousing and distribution facilities are conveniently located
near an Airborne Express hub. Packages can be picked up at the
warehouse, transferred to Airborne, and shipped to the customer in a
matter of hours. Not only does this delivery strategy constitute a real
benefit for customers, but, because there are a limited number of
opportunities for such a warehouse-hub connection, competitors will
find it hard to adopt the same strategy.
What happens when your product or service is delivered?
An often overlooked opportunity for differentiation lies in
considering what has to happen from the time a company delivers a
product to the time the customer actually uses it. Opening,
inspecting, transporting, and assembling products are frequently
major issues for customers.
That applies even to the delivery of services. Consider how difficult it
can be to get an auto accident claim processed and paid by an
insurance company. Now consider how Progressive Insurance of
Cleveland, Ohio, tackled the problem. The company has a fleet of
claims adjusters on the road every day, ready to rush to the scene of
any auto accident in their territory. There they can record all the
information they need and often settle claims on the spot for
policyholders. The process has greatly increased customer satisfaction
by eliminating the hassle and delay that so often accompany
conventional reporting, inspection, and assessment methods. A side
benefit for the company is that its approach also has decreased the
incidence of fraud by reducing the opportunity to file false claims and
inflate repair bills.
How is your product installed?
This step in the consumption chain is particularly relevant for
companies with complex products. For example, installation has
presented an enormous barrier for computer manufacturers trying to
break into the novice-PC-user market. Computer beginners are
notoriously intolerant of such on-screen messages as Disk Error 23.
Compaq discovered a valuable way to
differentiate itself: it provides customers
with a user-friendly installation video.
Compaq Computer, with its Presario line, was among the first to
target installation as a source of differentiation. Instead of providing
an instruction book filled with technical terminology, Compaq offers
its customers a poster that clearly illustrates the ten installation steps.
The company uses color-coded cords, cables, and outlets to simplify
installation further and also has rigged its computers so that a
cheerful video and audio presentation leads new users through the
setup and registration process when they first turn on the machine.
How is your product or service paid for?
Many companies unwittingly cause their customers major difficulties
with their payment policies. Heres a test to see whether payment
might be such an issue for your customers: Take a walk over to your
accounts-receivable department and ask to see a copy of a recent
invoice. If your company is anything like about 80% of those we have
worked with, the invoice will be virtually incomprehensible. Why?
Because invoices are generally designed by systems people for
systems, not customers. Given the prevalence of this situation, your
company may find opportunities to set itself apart by making the
whole payment process easier for customers to understand.
You may discover even greater opportunities by rethinking why your
company uses its current payment policy in the first place. We once
worked with a company in the energy control business that was
having a hard time selling its services to residential co-op owners. At
every coop, the company ran into opposition from a hard core of
owners who resisted the capital outlay involved in installing an
energy management system. The company eventually won a huge
share of the co-op market by altering its policy. Customers no longer
pay an up-front installation fee; instead, they pay over time, out of the
How is your product stored?
When it is expensive, inconvenient, or downright dangerous for
customers to have a product simply sitting around, the opportunities
for differentiation abound. Air Products and Chemicals, a producer of
industrial gases, grew to dominate its market segments by addressing
the problem of storage. Realizing that most of its customers
chemical companieswould rather avoid the burden of having to
store vast quantities of dangerous high-pressure gases, Air Products
built small industrial-gas plants next to customers sites. The move
pleased customers; it also generated switching costs. Best of all, once
an Air Products plant was in place, competitors had little opportunity
to move in.
How is your product moved around?
What difficulties do customers encounter when they must transport a
product from one location to another? Whether the journey is across
a room or across a state, this step in the consumption chain is another
often-overlooked opportunity for differentiation. Ask yourself the
following questions: Does the customer find the product fragile?
Difficult to package? Awkward to move?
Consider how John Sculleys marketing team at Pepsi-Cola used
packaging as a way to differentiate Pepsi from Coke. Sculleys team
created a distinctif temporaryadvantage for Pepsi in the early
1970s by designing plastic bottles that were lighter, and thus easier
for customers to carry, than the heavy glass bottles of the time. The
beauty of the move was that it not only made carrying soda easier, but
it also reduced the advantage of Cokes well-known contoured glass
bottle. At the time, it was difficult to produce plastic bottles in that
What is the customer really using your product for?
Finding better ways for customers to use a product or service is a
powerful differentiator. And such opportunities abound, especially for
companies whose products are expensive and used relatively
infrequently. General Electrics Transportation Systems division,
which , used this step in the
consumption chain as the basis for rethinking its business.
With few exceptions, the railroads that are the customers for GEs
locomotives are not all that attached to a particular unit. What they
really want to know is, if they have freight to ship, will a locomotive
be there to haul it? GE is working on an arrangement through which
the company will guarantee that a locomotive will be available on
demand. Under that arrangement, GE will take over the management
of all the engines in the customers system. It will relieve the
customer of repair and maintenance concerns, and also will gain
economies of scale by managing an entire network. Whats more, the
entry barrier created by such a system can be formidable.
What do customers need help with when they use your product?
The company with the most helpful response has a significant
advantage here. GE, for instance, has an enormously popular 800
number that is available 24 hours a day to help people who have
difficulty using any of the companys consumer products. Similarly,
Butterball Turkeys 24-hour hot line fields cooking questions from
hundreds of customers every Thanksgiving. Butterball has recently
supplemented its hot line with an Internet home page and a turkeycooking guide that its customers can download.
What about returns or exchanges?
Too many companies put all their efforts into the selling side of the
product life cycle, forgetting that long-term loyalty requires attention
to customers needs throughout their experience with a product.
Handling things well when the product doesnt work out can be as
powerful as meeting the need that motivated the initial purchase.
Nordstrom takes its no-questions-asked
return policy seriously, and the result is
strong customer satisfaction.
Nordstrom is an excellent example of a company that has taken this
issue to heart. The clothing retailer captured national publicity in the
1970s when one of its store managers took back a set of tires from a
customer despite the fact that Nordstrom did not sell tires. By
focusing on and aggressively promoting its no-questions-asked return
policy, Nordstrom has enhanced its position as a company that
provides unique customer service. Customers may be unhappy with
the brands they return, but they are not unhappy with the store.
How is your product repaired or serviced?
As many users of high-tech products will attest, repair experiences
both good and badcan influence a lifetime of subsequent purchases.
An ideal solution, used by Tandem Computersa company that
makes computers with for
applications in which downtime is a major problemis to try to
repair a product even before the customer is aware that such service
is needed. Tandem staff members can spot a malfunctioning
component through remote diagnostics, send the appropriate part
and instructions to the customer by express mail, and walk the
customer through the repair process on the phone. This approach has
almost completely eliminated expensive and inconvenient downtime
for the companys customers; it also has eliminated their need for a
costly on-site service force.
Otis Elevator uses remote diagnostics in a different way. In hightraffic office buildings, where servicing elevators is a major
inconvenience to occupants and visitors alike, Otis uses its remotediagnostics capabilities to predict possible service interruptions. It
sends employees to carry out preventive maintenance in the evening,
when traffic is light.
What happens when your product is disposed of or no longer
In a world in which it is becoming increasingly economical simply to
replace many products as they age rather than spend the money to fix
them, what do customers do with the obsolete goods?
Canon offers an interesting example of how a company can
differentiate itself at this step in the chain. It has developed a system
that allows customers to return spent printer cartridges at Canons
expense. The cartridges are then rehabilitated and resold as such. The
process makes it easy for customers to return used cartridges: all they
need to do is drop the prepaid package off at a United Parcel Service
collection station. At the same time, it enhances the image of Canon
as an environmentally friendly organization.
Analyzing Your Customers Experience
Although mapping the consumption chain is a useful tool in itself, the
strategic value of our approach lies in the next step: analyzing your
customers experience. The objective is to gain insight into the
customer by appreciating the context within which each step of the
consumption chain unfolds. It is crucial to remember that the
customer is always interacting with people, places, occasions, or
activities. Those interactions determine the customers feelings
toward your product or service at each link in the chain. When they
are viewed strategically, they can shape the dynamics of competition
for that customers business.
Essentially, this step involves considering how a series of simple
questionswhat, where, who, when, and howapply at each link in
the consumption chain. We have found that the most rewarding way
to approach this exercise is to have a group of people from a company
start down a path with any of their questions and brainstorm until
their ideas dry up. Sometimes a given question will not lead to any
particular insight. Thats not a problem; the goal is to assemble an
inventory of possible points of differentiation. Once the ideas are on
the table, you can assess each one and select those that are most
promising for your situation.
To analyze your customers experience,
consider how five simple questions apply
at each link in the chain.
Blyth Industries, the candle manufacturer we mentioned earlier,
provides a good example of how analyzing your customers
experience works in practice. By exploring the options raised by their
analysis, Blyth employees were able to take a prosaic product that is
easy to imitate and create a profitable competitive advantage. What is
important to understand here is that Blyth makes no pretense of
being able to create the fabled sustained competitive advantageso
beloved of strategy textsin any single segment of the candle market.
Rather, what the company seeks to do is be the first to create and
then dominate many small niches in rapid succession over time,
gaining economies of distribution and scale by the sheer number of
products it has in the marketplace.
Consider some of the possibilities that Blyth employees uncovered
when they applied the questions to their business:
What are customers doing at each point in the consumption chain?
What else would they like to be doing? What problems could they be
experiencing? (These problems may not be directly related to your
product or service.) Is there anything you can do to enhance their
experience while they are at this stage of the chain?
Candle makers might explore the
possibility of offering a complete
Candles, when you think about it, can play a role in everyday life in a
host of different ways. Among other things, they are used to celebrate
birthdays, create a festive atmosphere for dinner parties, warm buffet
dishes, cope with power outages, and set the mood for romantic
evenings. Candles can be purchased in specialty shops, at crafts fairs,
in supermarkets, and at card stores. Further, their use can be
accompanied by a huge variety of containers, displays, accents, and
mood-creating products. All this suggests that candle makers might
do well to explore the possibility of offering a complete candlelight
experience by producing or marketing complementary products as
Where are your customers when they are at this point in the
consumption chain? Where else might they be? Where would they
like to be? Can you arrange for them to be there? Do they have any
concerns about their location?
Because candles can have so many uses, it isnt surprising that there
are as many potential places for their use. Candles can be found at the
beach, on picnics, at proms, at weddings, at home, in restaurants, at
childrens birthday parties, and in places of worship. What quickly
became evident to Blyth was that the concerns and behavior patterns
of its customers were likely to be different in each location. That
insight suggested the potential for differentiation on the basis of
For example, consider how candles are used in the home. Virtually
every room in the house has potential: the dining room, living room,
kitchen, bedroom, bathroom, and basement can all conceivably
provide a setting for candle use, each for a different reason.
Who else is with the customer at any given link in the chain? Do
those other people have any influence over the customer? Are their
thoughts or concerns important? If you could arrange it, who else
might be with the customer? If you could arrange it, how might those
other people influence the customers decision to buy your product?
Honing in on the line of thinking Blyth used about domestic candles,
consider the use of candles in the dining room. Who else is going to
be there? The other people could be members of the immediate or
extended family, business associates, close friends, or a suitor. Each
type of person means a possible point of differentiation; each type
means a different experience, a different mood, and a different time.
Whenat what time of day or night, on what day of the week, at
what time of the yearare your customers at any given link in the
chain? Does this timing cause any problems? If you could arrange it,
when would they be at this link?
Take the scenario of a dining room with the family. Blyth found that
the question when uncovered a wealth of opportunities for
differentiation. Candles are used in the dining room with the family
on birthdays, anniversaries, holidays, and graduation days, and at
meals marking other special occasions. Each occasion provides a
distinct experience. Important for a candle maker, each also triggers
distinct emotions. Blyth employees were able to identify what became
several successful new areas of differentiation by exploring how their
candles might be designed in special shapes, colors, or scents. They
also came up with a variety of ways to package the candles and
combine them with such accessories as napkins to suit each situation.
Candles intended for use with family members at Thanksgiving, for
example, might be scented with cinnamon, colored in tones
associated with the holiday, and sold with special holders.
Because there are many holidays and other occasions when families
get together in the dining room, you can begin to get a sense of the
opportunities available for differentiation. Moreover, the process can
be repeated for as many different companions and settings as the
imagination of your employees can contemplate. Blyth, for example,
also has found a tremendous opportunity to differentiate its products
for romantic meals. CEO Goergen has worked hard to design scented
candles in various shapes in order to influence the ambience of such
occasions so that, as he says,
eating becomes dining, and dining
How are your customers needs being addressed? Do they have any
concerns about the way in which your company is meeting their
needs? How else might you attend to their needs and concerns?
Think about how candles are used outdoorssay, at a company
barbecue. Citronella candles come to mind. In addition to creating a
festive atmosphere, they are an attractive way to protect people from
As weve seen, there is considerable potential for differentiation even
in products so simple that at first blush they seem like commodities.
Candles are but one. Gasoline is another. (See the exhibit Is There a
Way to Differentiate Selling Gas?) Understanding the customers
experience at any link in the chain for any product offers companies
the opportunity to identify and explore many nontraditional ways to
create value. The task then becomes selecting from among this wealth
of possibilities; considering how each idea meshes with a companys
particular skills, assets, and systems; and focusing only on those that
can generate a competitive advantage. Each idea also may open up an
opportunity to develop a new competence.
Even a simple product such as gasoline
can be differentiated.
Is There a Way to Differentiate Selling Gas?
Consider the purchase link of the consumption chain.
What else are your customers doing when they buy
gasoline? Among …
Too many companies pursue what seem like great new ideas without
carefully assessing whether their organizations are well suited to do
so and how quickly competitors can respond. Robert Goergen knows
that Blyth Industries has certain strengths its competitors do not,
including several unique production techniques and, more important,
a deep knowledge of fragrances. Those special strengths, coupled
with a solid understanding of customers based on market research,
give Blyth an edge. Goergen thus evaluates opportunities for
differentiation based on those considerations and moves forward only
with the ideas that promise the strongest returns.
Virtually every company we have ever worked with has within it
scores of people of considerable creativity and imagination.
Unfortunately, all too often, the company never benefits because that
talent isnt appropriately focused. It may even be squelched by the
homogenizing pressures that any large organization tends to impose.
An important benefit of the process weve outlined above is that it
unlocks the creativity in an organization so that the insights of
particular individuals can contribute to a shared understanding of the
customerso that the company, in effect, knows its customers almost
better than they know themselves. Companies that do this
successfully find themselves deeply attuned to their markets. And,
like entrepreneurs, they spend the imagination they have in lieu of the
money they may lack to outperform competitors where it counts.
A version of this article appeared in the JulyAugust 1997 issue of Harvard
Ian MacMillan is the Dhirubhai Ambani Professor
of Innovation and Entrepreneurship at the
Rita Gunther McGrath is a Professor at Columbia
Business School and a globally recognized expert
on strategy in uncertain and volatile
environments. She is the author of The End of
Competitive Advantage (Harvard Business Review
Press), and most recently, Seeing Around Corners
(Houghton Mifflin Harcourt).
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That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more