How to differentiate in a crowded market
How to differentiate in a crowded market
- What is differentiation?
- How to build your brand differentiation strategy
- Rebranding to remain competitive in a crowded market
- Key takeaways
When Chobani first hit the yogurt aisles in 2007, most Americans had never heard of Greek yogurt. The product was richer and less sweet than Dannon or Colombo, with less sodium and more protein. These health benefits of Chobani resonated with American consumers, driving Greek yogurt from less than 1% market share to nearly 50% in just a few years.
Then the inevitable occured. Seeing dollar signs, Dannon and Colombo introduced their own Greek yogurt products. Soon countless other copycat brands followed. Just 10 years after Chobani was introduced to the market sales of spoonable yogurt began to decline. Mintel's 2017 report on the yogurt segment unequivocally states that Greek yogurt's "novelty wore off." As a result Chobani's brand lost its competitive edge and sales began to slip.
"Virtually everybody's copied us," said Peter McGuinness, Chobani CMO. "I'm not here to pick on the competition, but it's not been good for the category."
McGuiness' hand was forced; he'd need to identify new points of differentiation to stay one step ahead of the competition. A rebrand, or as we'll argue below, "an expansion" of the brand was in order.
What is differentiation?
Product differentiation is a marketing strategy that uses a brand's unique characteristics to its advantage when competing for audience attention and dollars. There are countless ways to differentiate, but here are a few of the most common:
- Features — What can your product do better, faster, more simply, or more economically?
- Proprietary technology — What innovation, patents, or other technological advances can only your brand claim? Proprietary technology gives brands an edge by being inimitable.
- Design — Is your product more beautiful, more functional, or easier to use?
- Customer service — Consider the entire experience around your product or service. How does your brand serve your customer better than anybody else?
Brands seeking to compete — particularly in crowded markets — can realize significant benefits by identifying and executing on a deliberate differentiation strategy.
Benefits of strong and favorable differentiation
- Grabs prospects' attention — By intentionally calling out how your brand differs from the competition, you draw attention to the unique attributes of your brand that are meaningful to your target customer.
- Takes the focus off of price — Unless you have massive advantages in manufacturing or economies of scale, it's very difficult to sustainably differentiate on price. Differentiation based on other attributes of your brand takes the focus off of price and helps your brand avoid getting sucked into pricing wars.
- Creates brand loyalty — Your brand's unique points of differentiation matter to a specific segment of your audience. By directly speaking to these attributes, you create brand loyalty with these consumers.
While differentiation can help your brand realize these benefits, there are also many signs that are indicative of a weak differentiation strategy.
Signs of a weak differentiation strategy
- Copycats — Your brand's points of differentiation should ideally be attributes that are not easily replicable.
- Price undercutters — Almost all brands will face competition from other companies that undercut them on price. If this occurs and your brand's only point of differentiation is price, that's trouble.
- Focusing on changing demands or expectations from customers — Don't differentiate on something that can easily become obsolete. This is why you see technology companies differentiating on innovation or other consistent attributes that run throughout their products rather than on the features or functionality of a specific product that will eventually become obsolete.
- Hyper-niche differentiation — If your point of differentiation only matters to a very narrow segment of customers, you may end up alienating potential customers.
EVERY product can be differentiated
Many brand managers dismiss differentiation by saying they sell a commodified product. But all products can be differentiated. One example: Fiji Water, a brand that commands a premium price based on the source and taste of their water. They sell the same combination of two hydrogen atoms and one oxygen atom as their competitors, yet they charge multiple times the price.
"There is no such thing as a commodity," says Theodore Levitt in his article Marketing Success Through Differentiation — Of Anything published in Harvard Business Review." All goods and services are differentiable."
This proves to be true even in commodity exchanges where goods like metals and grains are traded. While these products appear to be generic and completely undifferentiated, what is "sold" is often differentiated by execution: the efficiency of the transaction, a brand's responsiveness to inquiries, the clarity and speed of their confirmations. Ultimately what Levitt calls the "offered product" is differentiated, while the "generic product" is identical.
Particularly with consumer packaged goods, many less informed consumers perceive that even substantive differences in the generic product are so slight that the differences between products lie solely in their packaging or advertising. This presumption, Levitt writes, "is palpably wrong."
Coors Light uses differentiation to wage war in the light beer category
Bill Weintraub, former CMO of companies like Tropicana, Coors, and Kellogg's wholeheartedly agrees with Levitt.
When anybody says that a branded product is a commodity, that means that they can't identify what is distinctive or special about the brand. Somebody who understands marketing and the notion of differentiation understands that there are differences. It may be the most important principle in all of marketing.
Having worked with products ranging from orange juice to cereal to light beer, Weintraub is uniquely positioned to speak to how differentiation can be applied successfully to products that many consumers perceive to be quite similar.
"Miller Lite launched the light beer category and became very successful, so Budweiser copied them with Bud Light then Coors copied them with Coors Light," says Weintraub. "We decided to concentrate on what was different about Coors Light compared to Miller Lite and Bud Light, and the differences were partly in the way the product tastes. Miller and Budweiser had systems set up to pasteurize the beer. Coors had what's called a sterile-fill system which means that it's virtually impossible for microorganisms to get into the system so they don't have to pasteurize the beer."
"Pasteurization creates a bitterness and off-notes, so Coors Light is actually more refreshing than the other two light beers. If you were tasting them blind and you had a beer palate, you could taste the difference between the three. Because we had a different process and we didn't pasteurize, we called it cold-filtered — that was our name or nomenclature that we put on the packaging and advertising."
"Anheuser-Busch and Miller have breweries all over, but at the time all Coors Light came from our brewery in Golden, Colorado," Weintraub continues. "The water came from the Rocky mountains, and beer is 95% water so we took the imagery and the fact that all the water came from the Rockies which are associated with cold and snow, along with never being pasteurized to support the fact that the brand is more refreshing or smoother drinking than Miller Lite or Bud Light."
The differentiation was effective for Coors: during Weintraub's 10 years as CMO of the company Coors Light overtook Miller Lite, and the company's stock price tripled.
How to build your brand differentiation strategy
The point of differentiation that you choose for your brand can be an attribute, a benefit, or a feature, but the process of identifying your strategy is alarmingly simple.
"Start with what the brand truthfully, honestly, and accurately is," says Weintraub. "You relate that to how the brand is different or better than other brands on the market. There's something truthful, factual, actual, about the brand itself that's better. You need to find that and then match that up with some group of target consumers — not all consumers, but a particular set of consumers for whom that particular benefit is really important."
That's the secret of marketing a brand, matching the truthful distinctiveness of that brand with a particular, well-defined, target consumer.
The process of uncovering your brand's points of differentiation starts with carefully considering your product, audience, and market. You want to identify your unique selling point, the one thing that your brand does better than anybody else. It's also useful to consider the solution you are selling, not just the product. Put yourself in your customers' shoes and answer the question, "What's in it for me?" Finally, you must carefully consider the competitive landscape. Use this checklist of questions to assess the competition.
Competitor differentiation research questions
- How do they describe their product? What terms and phrases do they use? Do they fit into an existing category, or are they trying to create their own?
- What do they stand for? If you had to pick three words to associate with the product, which three words would you choose?
- What are they promising? What value do they claim to deliver? What unique attribute or outcome are they flaunting?
- Which features and benefits are they highlighting? Are there certain bells and whistles that they talk about more than others?
- Who are they talking to? Are they addressing a specific audience? Do they customize their language and topics based on certain demographics or segmentation?
- What is the brand personality? Are they quietly knowledgeable? Irreverent? Authoritative? Highly technical? Straightforward? Humorous? What is the product "voice" like?
How brands can discover new points of differentiation
Identifying new points of differentiation is a skill that can be learned and developed. "A company has the opportunity to differentiate itself at every point where it comes in contact with its customers — from the moment customers realize that they need a product or service to the time when they no longer want it and decide to dispose of it," write Ian MacMillian and Rita Gunther McGrath in their article Discovering New Points of Differentiation published in Harvard Business Review. "We believe that if companies open up their creative thinking to their customers' entire experience with a product or service — what we call the consumption chain — they can uncover opportunities to position their offerings in ways that they, and their competitors, would never have thought possible."
MacMillian and McGrath's process begins with what they call "mapping the consumption chain," which captures a customer's experience in its entirety with a particular product or service. The second phase of their process, "analyzing your customer's experience," consists of a brainstorming session about each step in the consumption chain. The goal of the session is to assemble an inventory of all possible points of differentiation by considering the entirety of the customer's experience.
The process is replicable no matter the industry your brand competes in, but doesn't alone deliver a successfully executed differentiation strategy.
Keys to successful differentiation in a competitive market
Once you have identified your brand's points of differentiation, it's time to execute on your differentiation strategy. Here are keys to implementing a successful differentiation strategy.
- Understand the existing customer experience and improve it to exceed your customers' expectations. One example of this is Apple's iPod — it was not the first portable music player but it allowed users to carry up to 1000 songs with them in their pocket, which was revolutionary at the time.
- Appeal to the emotions and desires of the consumer. A study conducted by Google found that "B2B purchasers are almost 50 percent more likely to buy a product or service when they see personal value — such as opportunity for career advancement or confidence and pride in their choice — in their purchase decision. This reinforces the importance of stepping into your customers' shoes and asking "What's in it for me?" when identifying your points of differentiation.
- Embrace that trade-offs are required for effective differentiation. Your brand can't be all things to all people — if it tries to be, your differentiation strategy will almost surely fail. Trade-offs are essential to differentiation strategy. They create the need for choice and purposefully limit what a company offers.
- Get creative. Differentiation can come in many different forms from packaging improvements to delivery mechanisms. For example, toothbrush maker Oral-B turned differentiation into a competitive advantage by patenting the use of dyed toothbrush bristles that faded in color when the toothbrush needed to be replaced.
Rebranding to remain competitive in a crowded market
Many brands, like Chobani, rode a strong and favorable differentiation strategy to market dominance only to watch their competitive edge evaporate amidst a sea of copycat contenders hawking similar attributes. When that happens, many brand managers feel that they're faced with no other option than to rebrand.
"I don't believe in the notion of rebranding; I believe in the notion of growing a brand because to rebrand it sounds to me like you have to change what the brand is," says Weintraub. "You can't change what the brand is because you don't erase people's memories, so their memories or their perceptions of the brand aren't eliminated, ever."
This reality produces a conundrum from brand managers; if they can't rebrand, how can they change the perceptions of their brand in a way that will once again strongly resonate with a segment of target customers?
"What you can do is identify aspects of the brand that maybe haven't been effectively communicated or that were always there that people didn't talk about," says Weintraub. "You don't change the brand, but you find something in the brand, in the product ideally, that nobody knows about, or you express it in a way that's clearer, more understandable, or more relatable to a consumer. Not all consumers, but a particular target consumer so that she or he comes to appreciate what that brand is."
It starts with finding something in the product that's real, not bullshit. It's the truth of the brand that it will sustain success, sustain growth.
This is exactly the challenge that Chobani CMO, Peter McGuinness, faced as he aimed to stay one step ahead of his competitors in the yogurt aisle.
Chobani rebrands to find new points of differentiation
Seeking new points of differentiation that would appeal to consumers, Chobani hired Leland Maschmeyer, the company's first ever Chief Creative Officer. McGuiness and Maschmeyer then set off to "rebrand" the company, aiming to move the brand beyond just yogurt to become a "food-focused wellness company." Much of the company's new advertising promotes the overall nutritional benefits of yogurt, touting its many uses such as acting as a substitute for recipe ingredients like sour cream — benefits that were always present in the product, but not articulated until now.
The brand also rethought its packaging with wellness in mind. Take a stroll down the yogurt aisle, and you'll find shelves filled with white plastic containers with impossibly bright berries bursting from their sides. Seeking to evoke the ideals of "organic" and "natural," on which Chobani built its business, Maschmeyer found himself drawn to folk art of the 1800s. The new packaging contains color palettes that come from nature, dominated by browns, off-whites, and most noticeably, hand-painted berries that celebrate the natural imperfections in the fruit. "When you have a strawberry [on the cup] that's too perfect, it's plastic," Maschmeyer explains. "We've introduced these imperfections in our brand so it feels more real."
"This look hasn't been done in the yogurt aisle," McGuinness added. "This is really a new articulation of what our ethos has always been."
To the brand manager look to rebrand, or as Weintraub says, "grow the brand," Chobani's work is something worth aspiring to.
- Your brand's points of differentiation are truths that are right in front of you — not invented fictions.
- There is no such thing as a commodity product; every product can be differentiated. Consider the generic product versus the offered product.
- Differentiation takes the emphasis off of price and strategically positions your company's unique attributes as different and better for a subset of target customers that care about the attribute, benefit, or feature.
- You can't fully "rebrand" a product because you can't erase a consumer's memory or perception of your brand. Seek to find a truth in the brand and communicate it in a way that's clearer, more understandable, or more beneficial to the consumer.