Differentiation is what makes you a meaningfully different choice, not just a better-sounding one. It must be true, relevant to the buyer, and difficult for competitors to claim. Without differentiation, buyers default to comparing on price, which is the worst ground to compete on.

If you cannot name what makes you different in a sentence, your buyers cannot either, and they will decide on price. Being better is not differentiation, because everyone claims it. Being different in a way that matters to a specific buyer is. That difference is what lets you hold your rate instead of discounting to win.

Example:

Faster and higher quality is not differentiation, because every competitor says it. Owning the growth number rather than delivering deliverables is, because most agencies will not take that risk.

Why does weak differentiation lead to price competition?

When buyers cannot tell the options apart on substance, the only remaining variable is cost. Differentiation gives them a reason to choose you that is not the cheapest bid.

What makes a differentiator credible?

It must be true, provable, relevant to what the buyer actually cares about, and hard for a competitor to honestly claim about themselves.