The importance of differentiation for micro-brands

In our examination of purchase decision, we suggested that a brand (or a micro-brand) can draw a significant advantage from having a high differentiation. But what does it mean?

Differentiation for micro-brands

When deciding what brands they like and support, 88 percent of consumers say that authenticity is a key factor (Mohsin, 2023).

The importance of authenticity in the decision to like and support brands

A 2016 Gartner research (Barnes, 2016) found that when there is a failure to differentiate, 59% of buyers are more likely to work with established providers (Thomas, 2020).

What is the impact on your buying effort of a provider failing to differentiate?

The impact of a failure to differentiate on the buying effort

Lack of differentiation also delays buying decisions (37%), prompts asking for more concessions around price or terms (27%), or makes it more likely that there will be no sale at all (30%). The bottom line: Differentiation must be mastered for sales success.

Difference is worth paying more for. Kantar Group and Affiliates analysed 40,000 brands and found a very strong relationship between increasing relative uniqueness and a consumer’s willingness to pay more for a brand (Kyriakidi and Staplehurst, 2022).

enter image description here

Differentiation is the secret ingredient

First, you must appreciate the fact that current customers are quite knowledgeable and are out to maximize the value from the offerings that they purchase (Saxena, 2018).

Second, customer value and brand loyalty are two facts that go hand-in-hand. When you assure customers of the value they obtain from your offerings, then you tend to encourage brand loyalty.

Third, you should be aware that the current business environment is characterized by vast knowledge, value, efficiency, and innovation.

The last and most important benefit that you look for in product differentiation is to maximize your profits. When you serve the needs and wants of your customers, they would be willing to pay a premium for your products because they lack a reason to seek substitute offerings.

When you want to differentiate your offerings, you should make sure you address the following questions:

  • How do I want my products to perform compared to those of my competitors?
  • What quality to customers need in my offerings?
  • How durable are my products?
  • Is the design of my product different from those of my competitors?

Different doesn't necessarily mean differentiated

To successfully differentiate, you should also consider additional categories of differentiation and expand the total buyer experience and the total value that you can bring to a client in more than one of these areas:

  • Capabilities/products
  • Customer experience
  • Risk mitigation/brand
  • Terms and conditions
  • Price

You must go beyond merely a tally of your unique capabilities and attributes. Differentiation means you successfully connect your unique capabilities, tangibles and intangibles to your individual prospect's problems. We call this the "why" behind the "buy" (Thomas, 2020).

  1. Understand why your difference matters. Why would they care? Do you solve a unique problem? Does your difference add value to the prospect in some way?
  2. Uncover that need for your differentiator: Once you figure out what their needs and their problems are, match it against the differentiators that they might care about.
  3. Connect your solution to the prospect's problems: Connecting your prospect's needs to your differentiators is where it all comes together.

Benefits and drawbacks of differentiation

A differentiation strategy is an approach to business development whereby a business offers its audience a product or service that is one-of-a-kind, different, and distinct from what the competition offers (Famy, 2023).

Benefits of differentiation (Leonard, 2019):

  • Easier to communicate
  • Create true and latent loyalty

Drawbacks of differentiation

  • Polarisation
  • Exclusion

Almost all businesses start with the 'what' when they're talking about differentiation and very rarely the 'why' language (Stibbe, 2021).

A differentiation strategy works best when a business can zero in on which piece of their business is worth highlighting as a unique selling point that will appeal to their audience.

  • High value, high variance attributes is where differentiation happens.
  • Really sweat the things that make a difference as a strategy.
  • Find a niche market that values those differences.
  • Make it difficult and expensive for competitors to copy you.

Differentiation strategies to draw inspiration from

It’s tempting to be a safe and boring company. A safe and boring marketing strategy churns out safe and boring stuff. It’s inoffensive and, thus, beyond criticism. You don’t stand out but also won’t get hit. Nobody will call you out. You’re just like everyone else (Laja, 2023).

  1. You can’t compete on features (for long).
  2. Markets are getting only more saturated.
  3. Over time, competitors become more similar.

It’s not enough to be just a little bit different. The differentiation needs to be big enough to tilt the decision in your favor.

  • A differentiating strategy based on price is not sustainable.
  • Small, subtle differences are not enough.
  • It’s scary and difficult to be different.
  • Why radical differentiation is key

The marketing classic Differentiate or Die (Trout and Rivkin, 2008) offers ideas for eight types of differentiation:

  1. Be first
  2. Be an attribute leader
  3. Be the preferred provider
  4. Heritage
  5. Leadership
  6. Specialize for a target market
  7. Make your products in a special way
  8. Be hot

Differentiation strategies to avoid

From starting with the wrong approach to targeting your audience ineffectively, it is crucial to ensure that the whole process is carefully planned if you don’t want to have the opposite effect (Miteva, 2023).

  1. Mixing strategies
  2. Focusing exclusively on innovation
  3. Not having a clear target audience
  4. Overpromising
  5. Copying the competition
  6. Not doing your research
  7. Fixing very high prices
  8. Miscalculating your profit margins
  9. Trying to reach everyone
  10. Not taking into account possible threats
  11. Not being honest with yourself
  12. Relying too much on marketing
  13. Not creating a personality for your business
  14. Not having a clear communication
  15. Getting too influenced by trends

References