ANSWER: As with many issues in business, the answer to this question is, It depends. You should seek first to differentiate your product or service from the alternative that prospective customers in your target market segment are most likely to pursue if they do not buy from you.

Therefore, if members of your target market segment would most likely do things the old way if they didnt buy from you, by all means focus on communicating how your offering is superior to the old way of doing things. Alternatively, if members of your target market segment who dont buy from you would most likely purchase from one of your new market competitors, you should focus on differentiating your offering from them.

In making this judgment, it is critical to define your target market segment correctly. Well use handheld calculators as an example. When first introduced, they were, at least in part, a replacement for the slide rule (yes, unfortunately, we are old enough to remember this). If you were a calculator manufacturer in the very early days of this new technology and defined your target market as all people who used slide rules, you would have sought to differentiate calculators from slide rules. However, a more narrow definition of the target market might have yielded a very different answer.

Many people employed as engineers and scientists used slide rules. They had been doing so for years. They probably werent going to change, at least not quickly. However, there was a group of early adopters who would likely move immediately to calculators. They were called students. In the mid-1970s, students stopped learning to use slide rules and migrated en mass to calculators. They no longer seriously considered slide rules.

If you defined your target market as engineering and science students, it would have done you no good to differentiate your product from slide rules. They werent going to buy a slide rule anyway. You would have needed to differentiate your offering from other calculators, because if a student didnt buy your product, he or she would surely buy a different calculator. This competition led to the functionality wars between Texas Instruments and Hewlett Packard. The point is that defining your target market segment is critical.

It may well be that youll decide to focus on touting the benefits of your product versus the old way of doing things, because if a prospective customer doesnt purchase your offering, theyll likely do things the old way. However, remember that this strategy is likely to be successful only in the short-term. Once the new market is successfully established, youll be competing against those who helped you build this market. Eventually, youll have to differentiate your offering from theirs.

Our best advice is to differentiate your offering from your target customers likely alternative to purchasing from you. However, even if your initial marketing message will focus on why your offering is better than doing things the old way, dont lose sight of your new market competitors. Have a plan for differentiating yourself from them, because at some point you will have to do so.

Its a fair bet that if Texas Instruments had just focused on being better than slide rules, Hewlett Packard would have put them out of the calculator business in a hurry.