Business Insights

Business Insights

How Can Brand Differentiation Make Or Break A Business?


Jet skis, Hoovers and Velcro all have one thing in common. They’re all brand names that have become shorthand for their particular categories. No-one asks for a personal watercraft, a vacuum cleaner or a hook and loop fastener. We all fall back to the brand name, and everyone understands.

Owning a category as these brands do is a differentiation paradise that is tough to achieve. But differentiation shouldn’t be ignored: it can make or break a business. Getting it wrong can gradually eat away at your bottom line to the point that you’re only competing one way: price.

The good news? Marketing can help.

 

Differentiation: Why is it so important?

An undifferentiated business will see decreasing returns on sales and marketing activity. It will have to work much harder to generate the right attention, opportunities and leads. With a declining pipeline, it’ll start to see a gradual drop in profits, too. Many businesses combat this by discounting more and fighting a battle on price point alone: red flags all round.

If you struggle to identify and explain what your business does differently or if your marketing materials are clichéd and lack depth, lack of brand or product differentiation is likely the cause.

Aside from the impact on marketing ROI and the bottom line, don’t ignore your gut instinct. Many business owners know in their heart of hearts that they’re not saying anything different to any of their competitors. This can have a dramatic impact on motivation and drive: and if the owner’s feeling it, the business will feel it too.

 

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What happens when you don’t differentiate your brand?

Differentiation is one of those business issues that needs to be addressed otherwise you’re likely to experience a decline in growth momentum, and the amount of work you have to put in to generate business will become apparent. You will also have to compete more on price where once you didn’t.
Look at supermarkets’ own-brand products. They don’t market themselves, there is no branding, they don’t offer anything different to the rest of the shelf - on purpose. They are specifically designed to compete with the likes of All Gold Tomato Sauce or Kellogg’s on cost alone.


What is product differentiation?

Product differentiation is a marketing strategy for distinguishing your product or service from your competitors. It’s what makes your brand stand out and what makes it special. The approach should be two-fold when it comes to communicating your product differentiation.

1.You need to be able to identify and express your product’s unique qualities.

2. You need to demonstrate to your audience what the distinct differences are between your product and your competitor’s offering, and what the benefits are of choosing your product.

Product differentiation can be communicated through the product’s name or slogan, advertising and marketing campaigns, packaging and presentation, price point and customer experience: any aspect of the product that has a potential impact on the customer. When done well, product differentiation helps build brand awareness and creates a competitive advantage. When done poorly, your brand will fade into the shadow of your competitors.


Types of product differentiation:

There are three main types of product differentiation:


1.Vertical differentiation

This type of product differentiation focuses on price over quality. Think back to the Tesco Value analogy earlier and you’re on the right lines.


2.Horizontal differentiation

This refers to product differentiation that is not related to price or quality and is mainly focused on consumer preference; choosing the accountancy platform Xero over a competitor like Sage, for example.


3.Mixed differentiation

Mixed differentiation generally occurs with more complex buying decisions where a number of different factors are involved. So, when choosing a new bike, for example, you will want to be sure that it has the right spec to meet all your commuting and recreational needs but you’ll also want it to look great, too. And you’ll be keen to get a great return on investment to boot.


Promoting product differentiation

Promoting product differentiation involves identifying and communicating your product’s unique characteristics, features, benefits and values. When you get this right, it is a great tactic for getting your branding and messaging right for your audience, and building your brand in the long-term.


Measuring product differentiation

The way that you measure product differentiation will depend on the nature of your product, and where your offering sits in relation to your competitors. The differences might be physical and/or measurable such as the cheapest or fastest broadband provider in a specific area. Or it could be a less tangible metric such as the freshest tasting fruit juice or the comfiest trainers, which are subject to the consumer’s personal preference and likely to be influenced by the advertising campaign that is promoting them.


How to create product differentiation through marketing?

In marketing, there are givens, and there are differentiators. Givens are vital: without them, customers won’t do business with you. A quality product; knowledgeable people; excellent customer service - you need these just to be in the game. They’re the same things that your competitors boast of, too.

Dove, for instance, was a quality if serviceable personal care brand. In 2004, it launched the Campaign for Real Beauty, a campaign that redefined the accepted norms of what beauty was and was a hit on social media. Instead of the usual size zero models, Dove put normal women front and centre.

Dove set out a mission - a brand value that persists to this day. Crucially, it had a huge impact on the bottom line, too: Real Women led to a 700% rise  in sales of Dove in the first half of 2005.

Closer to home, financial advisory firm Menzies was known as a high-quality effective business, but a slew of low-cost online accountancy solutions had begun slowly eating into their profits.

The goal was to find the position that would best serve their purposes, that would enhance the existing Menzies culture. The outcome of this was ‘Brighter Thinking’: a concept which conveyed how Menzies wanted to portray themselves, but also encapsulated what their target market was looking for in a long-term relationship with an accountancy firm. Customers needed to hear “we know you can’t play quick and fast with a customer’s finances. You need smart people making smart decisions.”

For Dove, they differentiated by talking outside the product itself, aligning it with a movement - a campaign. For Menzies, it was about highlighting their finance and accounting expertise, combined with strategic commercial thinking. Neither, you’ll notice, mentioned price at any point.


Where do you start?

Imagine that you’re sitting at a table. On the one side is your business and all your competitors, and on the other side are your customers. Each has one sentence to convince the customer to use them instead of the competitors. What would you say?

It’s important to realise that this meeting does take place every time a customer decides on a specific brand/service/product to buy. The only difference is, it happens in their minds.

Here are a few questions to help you understand what your one sentence would be:
  • What is the problem your customer is trying to solve?
  • How would you solve that problem?
  • Why should they choose your product or service over your competitors’?

For instance, our answer could be:

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The benefits of differentiating your business

The benefits of a truly differentiated business manifest in a few different ways. First, are all the benefits that come with having a strong, unique brand: more profit, lower cost per acquisition (CPA), a more valuable business, growth.

You will be able to say with confidence who you are, what you do and why you do it. You’ll be able to say the business helps [X] to do [Y] by doing [Z]. You’ll have carved out your niche within the market, and be able to explain exactly what it is you do that your competitors don’t.

On the marketing front, you’ll be able to explain what you do to people easily, without falling back on tired clichés or ‘givens’ to explain your positioning.

Lastly, your business mindset as a whole will improve once your vision is clearer. Differentiation carves a niche in the market, inspires everyone within the business, focuses the company mission and revitalises the brand’s momentum and growth.

If you find yourself always competing on price, if your cost per acquisition is increasing or if you simply know that your business is saying nothing new, differentiation - or lack of - is often the root of the problem. Pull the business apart and work out what it is you do, where you sit in the market and how you differ from the competition, and you’ve created a platform to break through the growth barrier.

Get it right, and you’ll notice the difference to your bottom line.


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