When making decisions to purchase, customers choose the brand and company that gives them the value that others can’t match. A brand that can show it is different from others, in a way that is relevant to customers, gains a significant competitive advantage. Unfortunately, we are frequently reminded of the lack of true differentiation in most mainstream organizations—and of the opportunities they are thus squandering.
The problems associated with brand indistinguishability are multifaceted and seen across three distinct categories of metrics. The first category of measurement affected by a lack of differentiation is basic brand health metrics, including decreasing levels of awareness, relevance, uniqueness, consideration, and purchase intent. These are the measurements many brand managers care most about, and although these are undoubtedly troubling, they pale in importance when compared to other metrics.
The second category is broader business metrics, such as lower levels of sales, brand loyalty, and market share. These are even more problematic because they’re not only attitudinal (like many of the brand metrics mentioned above), but they reflect actual customer behavior. Namely, customers are purchasing the brand less frequently.
Ultimately, brand indistinguishability has a direct and negative impact on a third, critical set of metrics: financial performance. Undifferentiated brands struggle to command a premium price point (including a heavier reliance on discounting, aggressive promotion, etc.) and face slower revenue growth, lower margins, and overall profit and even decreased shareholder value.
With truly differentiated brands, much of the distinction goes beyond their products and services. With Apple, you don’t just purchase a computer or a phone, but a seamless collection of related digital services and a genius bar to help you solve problems. With IKEA, you don’t just buy a chair or a table, but a means of decision-making, assembling, and delivery.
At the heart of differentiation is your brand’s ability to develop and promote distinctive products, services, and branded experiences on a consistent basis. It’s critical to create a brand that stands out from the crowd. When these differentiating qualities are well-represented, customers will take note. So much so that they will pay up to 16% more for a product or service that leverages its differentiation to offer a better customer experience.
Many brand strategists would argue that the only way a brand can truly become successful is through a well thought out differentiation strategy. According to the Harvard Business Review, “The most effective companies don’t rely on distinctive products, services or brand for differentiation; instead, they focus on creating an enterprise so distinctive that it can create many products, services and brands, each more compelling than the next.”
Depending on your company’s competencies, offerings, and the competitive landscape, there are many pathways to differentiation. However, a common quality that successful differentiation strategies share is a deep understanding of what the customer needs—and that’s what makes them go the distance. Simply put, not only do consumers suffer the consequences of indistinguishable brands but so do the companies that own them. It has a direct and negative impact on bottom-line results.