Why brand differentiation still matters

by Nigel Hollis | September 03, 2014

Some people believe that differentiation is not important to brand success. Others seem to have given up on the fight to differentiate their brand. That might be OK if all you need to do is sell more stuff, but if you want to grow profits, you had better continue to worry about differentiation.

An article in MIT Sloan Management Review: Summer 2012 Research Feature titled, “Is It Time to Rethink Your Pricing Strategy?” states:

We find that many managers in (competitive) industries mistakenly assume themselves to be in a “commodity” business. They then neglect the possibility for differentiation and customer value creation and resign themselves to competing solely on price.

The authors of the article, Andreas Hinterhuber and Stephan Liozu, suggest that seeing your product as a commodity tends to be a self-fulfilling prophecy. They propose that through deeper research into customer needs, almost any product or service can be differentiated.

A different apple

I have no doubt they are right, although I might suggest that the use of the word “needs” might focus us too single mindedly on product differentiation. Differentiation can be achieved in a number of different ways, including positioning, communication and design. A brand needs to be perceived as different by its consumers and that difference may be more a feeling than a fact. For less considered purchases, tone of voice may be enough to differentiate the brand from its competition.

Maybe it is worth reminding ourselves why differentiation still matters. I see three ways in which differentiation influences brand success:

First, a difference makes it easier to choose between close alternatives.

Second, a difference helps people justify paying a price premium for a brand.

And third, a difference allows us to easily rationalize our purchase, making us feel more satisfied with our choice.

All of our research finds that if people perceive a brand as meaningfully different they will be willing to pay more for it. When we merge consumer survey data with behavioral data, we find that people who believe a brand is meaningfully different on average pay up to 22 percent more than those who do not. That difference can have huge profit implications, so maybe it is time to renew the fight to differentiate your brand.

So why do you think people give up on trying to differentiate their brand? Please share your thoughts.  

6 comments

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  1. PZ, January 29, 2018
    Because they're lazy. 
  2. Felix Djamatey Wilson, September 04, 2014
    Differentiation isn't something you just try on a brand and it works.It takes months or even years to create that impression in the minds of your target audience that you product outperforms that of its competitors. I believe lack of top management commitment to commit their resources to this cause makes it very difficult for them to continue with this. if at the back of their minds they forecast the long term profit implications in engaging in sustainable diferentiation. Only then will they realize the need to embark on sustainable differentiation strategy 
  3. Byron Sharp, September 04, 2014
    Do you find that (the few) people who perceive the brand as meaningfully different pay (up to) 22% more for that brand?  Because that seems odd, after all they shop in the same stores, are exposed to the same prices, so even if they wanted to they couldn't pay more.  Perhaps they are more likely to buy it when it isn't on discount than other buyers of the brand?
  4. Vikram, September 04, 2014
    Not knowing how customers needs are changing to stay ahead of competition on game of differentiation. and a bigger one is not able to show value of their product to customers better than competition or even otherwise on a standalone basis 
  5. AS, September 03, 2014
    Because it is complicated and requires ideas...
  6. Paul Edwards, September 03, 2014
    Because they confuse differentiating the product with differentiating the brand.

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