Several years ago, I visited a small tackle retailer in Branson, Mo., near Table Rock Lake. Though it was spring and the fish were biting, I was there for business—to learn how this 1,200-square-foot store thrived despite fierce competition from a nearby big-box retailer.

His answer was simple: “I’m different.”

“Those [other retailers, which included several big box stores] sell tackle,” he said. “I sell service. I sell selection. I sell exclusive merchandise, including apparel. And, I sell [a customer experience] no big business can offer. We don’t even try to sell. We try to be helpful. The products sell themselves.”

That day, I learned an important lesson—differentiation is not simply a strategy; it’s a competitive moat. Not only does differentiation set you apart in a crowded market, but it makes your business the most viable option in a sea of choices.

Why differentiation is superpower for small businesses

As a lifelong angler and outdoorsman, I’ve spent countless weekends in tackle shops across the country. What fascinates me is not just the products but the sales strategy behind them.

The most successful small businesses:

• Understand their market. They know their ideal customers inside and out.
• Know their audience. They recognize customers’ needs, preferences, and shopping behaviors.
• Stand apart from competitors. They don’t just sell—they create unique experiences.

How the Missouri tackle shop shop differentiated itself

This small-town retailer outperformed big-box competitors by mastering three key areas:

• Proprietary pricing – special discounts and exclusive deals unavailable elsewhere
• Unique merchandise selection – limited-edition products that created a sense of exclusivity
• A distinctive sales experience – a no-pressure, expertise-driven approach that built trust

Would I choose to shop there over a big-box store? Absolutely. And I wasn’t alone—the store dominated outdoor retail in the area.

Why small businesses struggle with differentiation

Many small business owners make a critical mistake: They assume their product or service alone is enough to win customers. I’ve worked with two common types of business owners who struggle with differentiation:

• The “better product owner – They believe their offering is inherently superior and expect customers to flock to it.
• The “blockbuster innovator” – They assume they’ve created something so groundbreaking that competitors won’t catch up.

The problem?

Both fail to recognize that customers don’t buy “better” alone—they buy different. Too often, these business owners only see their own market and workspace—they don’t consider the thousands of other entrepreneurs working on similar ideas. This blind spot leads to missed opportunities and lost market share.

How to make differentiation a superpower for your small business

I once worked with a serial entrepreneur from Virginia who was excited about his new product.

“Let me snap a picture and send it to you,” he said.

When I saw it, I knew of at least three other companies creating near-exact replicas. I was consulting for one of them.

I asked: “What happens if your product enters the market alongside six similar competitors?”

He hesitated before replying:

“I’d be surprised because I don’t think anyone else has thought of this before.”

That’s a dangerous mindset. In business, what you don’t know can and will hurt you. Because of NDAs, I couldn’t disclose what his competitors were working on. But I developed a framework to help businesses navigate differentiation successfully.

Three rules of differentiation that give small businesses an edge

Your product must be meaningfully different from the competition.

• Not just “better”—but distinct in a way that matters to customers.

Target a part of the market that’s difficult for competitors to enter.

• Find gaps in the market where large competitors won’t or can’t compete effectively.

Own your niche instead of being a first mover or fast follower.

• Focus on long-term positioning rather than rushing to market.

Most CEOs and marketing leaders don’t like this advice.

They have cash, ideas, and ambition. But differentiation is about strategy, not speed.

I’ve proven time and again that doing what everyone else is doing, only slightly better, only plays into your competitors’ hands.

Final thoughts: Differentiate or go over the price cliff

If you fail to differentiate, you’ll be forced into a price war—and small businesses rarely win price battles against bigger competitors. I repeat again: differentiation isn’t a competitive advantage; it’s a survival tactic.

(image source: KyleWiTh)