In terms of e-commerce, differentiation is, simply, how one company sets its e-commerce products and services apart from those offered by competitors. In some cases, the differentiation might be in name recognition. In a world filled with Internet startups, the familiarity of a name like Hewlett-Packard or Microsoft could be an important distinction to some customers looking to purchase e-commerce technology and services. Pricing, product functionality, and the comprehensiveness of services also are common areas where Internet-based businesses look to differentiate from competitors.
BizRate.com, one of the Internet's busiest retail centers, successfully differentiated itself from other online business ranking sites via the method it uses to gather the information that makes up its ratings. Unlike rivals such as Gomez.com, BizRate uses data from actual shoppers to create ratings, rather than hiring a staff for that purpose. The site was created in June of 1996 by 27-year-old Farhad Mohit, who wanted to help online shoppers find trustworthy merchants in the rapidly expanding Internet marketplace. Mohit envisioned a site that would allow consumers to peruse objective information about an online store before they actually purchased merchandise from it.
The Dow Jones Internet Index (DJII) is an example of an e-commerce venture that used name recognition to differentiate itself from a host of rivals. Since its early 1999 launch by Dow Jones and Co., DJII has gauged the stock performance of Internet companies based in the United States. Dow Jones established the DJII in response to the intense Internet stock trading that started to occur in the mid-1990s. Highly successful initial public offerings (IPOs) by firms like Netscape and Yahoo! sparked the trading frenzy, and in 1999 an unprecedented 240 Internet-based firms conducted their IPOs. According to Dow Jones Indexes Managing Director Michael A. Petronella in Information Today, "Internet stocks have rapidly become among the most volatile, popular sectors of the equities market. This has led to the need for an Internet benchmark that can be the standard Internet stock measurement tool for all investors." Many firms agreed with Dow Jones, prompting the launch of several competing indexes, such as the Business 2.0 Internet, USA Today Internet 100, Internet.com 's Isdex, and the [email protected] Week @Net Internet index.
Along with its recognized and respected name, Dow Jones believed that a set of tangible inclusion standards would help to differentiate DJII from rivals. Therefore, the companies listed on DJII must secure at least half of their annual revenues from the Internet. Also, the firms must be valued at $100 million for a period of three months, must have operated as a public company for at least three months, and their stock prices must average a minimum of $10 per share.
Sapient Corp. offers a third example of differentiation. The firm offers Internet integration services to governmental entities and to firms like iwon.com, Janus, Nabisco, Staples, United Airlines, and Wal-Mart. Sapient was founded in 1991 by Jerry Greenberg and Stuart Moore, who decided to create a client-server integration services firm like no other. Like many other client-server integration consultants, Sapient helped clients determine how networking technology could streamline operations. However, the firm went several steps further than most rivals by also building, implementing, and supporting whatever technology they decided to use. Another point of differentiation came with the contracts Sapient offered clients—at the time, they were the only technology consultancy willing to commit to prices and deadlines before a project began. Also, employee pay was tied to customer satisfaction.
The firm's differentiation strategy paid off throughout the 1990s as sales and earnings grew consistently. An IPO in April of 1996 raised $33 million and allowed Sapient to make acquisitions that shifted its focus to e-business integration services. Eventually, the firm offered a comprehensive suite of e-commerce services that included the planning and creation of online stores. With sales exceeding $500 million in 2000, Sapient became the first pure-play Internet integration services firm added to Standard & Poor's 500 stock index, a fact which earned it further distinction from its rivals.
"BizRate.com Becomes Second to Amazon as the Most Popular Retail Site on the Web." Business Wire. February 15, 2001.
Colkin, Ellen. "Net Stocks Tracked." InformationWeek. February 22, 1999.
"Dow Jones Indexes Launches Internet Index." Information Today. April 1999.
"Dow Jones Internet and Technology Sector Indexes Become Now Tradable Through New Exchange-Traded Funds; Total Assets Linked to Dow Jones Internet Indexes Top $240 Billion." Business Wire. May 18, 2000.
Futrelle, David. "The Internet Index Mania: There Are Many Benchmarks, but Few Measure Anything Meaningful." Money. November 1, 1999.
McNamara, Paul. "BizRate.com Founder Farhad Mohit Eyes Every Aspect of His Business the Same Way Comic Steve Martin's Cop Character on 'Let's Get Small' Looked at a Shrunken Motorist: We're Gonna Have to Measure You." Network World. February 5, 2001.
Mulqueen, John T. "Young Company Flourishes." CommunicationsWeek. June 17, 1996.
Rosa, Jerry. "Eleven—Jerry Greenberg—The Stalwart." Computer Reseller News. November 13, 2000.
"Sapient Corp." Advertising Age. June 19, 2000.
"Siteseeing." Computer Weekly. January 13, 2000.
Smith, Geoffrey. "There's Good Reason for the Buzz About BizRate." BusinessWeek Online. November 26, 1999. Available from www.businessweek.com.
Weintraub, Arlene. "E-Commerce Crusader." Businessweek Online. June 5, 2000. Available from www.businessweek.com.
Whitford, David. "The Two-Headed Manager: Sapient Co-CEOs Jerry Greenberg and Stuart Moore Have (Almost) Nothing in Common. That Helps Explain Why Their Relationship Works." Fortune. January 24, 2000.
SEE ALSO: Business Models; Competition; Competitive Advantage
1. (in embryology) the process in embryonic development during which unspecialized cells or tissues become specialized for particular functions.
2. (in oncology) the degree of similarity of tumour cells to the structure of the organ from which the tumour arose. Tumours are classified as well, moderately, or poorly differentiated. See also grade.