The small business software space is crowded, which raises an interesting overall question about how to differentiate among products that are for the most part all pretty good.

When we spoke with Ariel Diaz, CEO of Blissfully back in June, we explored the idea of brand as a differentiator. In other words, if all the tools in a category are about the same, the brand that breaks through wins. This struck me as a game that favors the well funded, but Diaz argued that the small business app space, the democratization of the tools and patterns used to develop software has made it much harder to differentiate on product than it was say five years ago.

“As opportunities to differentiate a product has diminished, what is left is branding,” Diaz said, He argued however that while having the financial leverage to invest in branding helps, building a brand “is also about the emotional connection that your brand has, and that can be built in more organic ways.”

Fast forward to last week and our conversation in Gusto’s San Francisco offices with its marketing chief Tolithia Kornwebel, where she argued that customer experience is the key driver of her company’s efforts to stand out in the hyper-crowded payroll processing sector.

Gusto is a big name and an important player in the SMB software space generally and the HR and payroll space specifically, having raised about $316 million to date. But as SurePath Capital notes in its recent write up on Gusto, the company’s roughly $2 billion value is only a small fraction of its old line rival ADP, but it has achieved this is about six years, compared with more than 60 years for the payroll processing giant.

“Customer service is a key competitive advantage for us and is part and parcel of why we have an NPS score of over 70,” Kornweibel said. “it is not just software, it is also a service that is designed around the a user who is not an HR pro.”

The emphasis on service over technology is key to driving a positive customer experience for Gusto, which often has to help small business navigate through the difficult moments that are inevitable in payroll and HR — issues with taxing authorities and so on. “We need to build those capabilities into our software experience and we need to build content resources to help small businesses get past that moment…We always talk not just about technology but about service with equal importance.”

This prompted a question about how Gusto can scale this level of service in a small business SaaS product. The answer was “process power.”

“One thing I learned from working at Esurance is that if you invest in automation that touches the customer but also tocuhes your internal folks who are helping your customers, then you can scale high quality customer experience,” she said.

Here is the except from the podcast where Tolithia talks about customer experience as a differentiator.

You can listen to the full Above the Cloud podcast below, or you can read our summary of the conversation that we posted earlier this week.

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