A brand differentiation strategy can increase your profit margins, allow you to compete in categories other than the lowest pricing, and play up your product’s strength to give you a competitive advantage.
When done right, your differentiation strategy can also foster consumer brand loyalty and earn you the perception of being irreplaceable.
This article breaks down what a brand differentiation strategy is, the most common types of brand differentiation, and how to go about creating it.
What is a differentiation strategy and why does it matter?
A brand differentiation strategy is a strategic approach to brand positioning that companies use to establish their offer as superior to their competitors. At its core, it is comprised of the reasons you give your audience to choose your brand over your competition.
The strategy consists of finding how your brand is unique compared to your competitors and playing to your strengths as a way to attract a market segment.
Understanding your own uniqueness can be learned from revaluing your messages and discovering insights, which you can gather from infographic ideas and social media content.
Without a differentiation strategy, one of the few ways to stay relevant or competitive within the market is by lowering your prices. Furthermore, your differentiators can foster a loyal brand following and increase your brand equity over time.
Broad differentiation strategy vs focused differentiation strategy
There are two approaches when it comes to a brand differentiation strategy.
You can do a broad differentiation, which is when the brand’s goal is to stand out from the competition while still appealing to a broad audience. This is often challenging because there tend to be more competitors in a broader market.
Another drawback is that there’s less opportunity to appeal directly to a specific segment.
The other option is focused differentiation. This type of differentiation takes a narrower approach where the brand aims to appeal to a more specific segment of the market.
A focused approach can help the brand hone in on a segment by offering a specific outcome tied to specific products, features, and offerings. This enables the brand to establish its relevance and gives it the ability to speak directly to smaller or niche markets.
Your choice of brand differentiation strategy will come down to what your audience values the most and how you can best leverage it.
The size of the market and the brand’s goals should also influence the direction you take. Ultimately, there isn’t a one-size-fits-all approach to brand differentiation strategy.
8 examples of brand differentiation strategy
1. Market specialization
A brand differentiation strategy based on market specialization means that your brand is known for doing one thing really well.
The key element is figuring out what you can stop doing in order to focus on one specialized skill and develop it to the best possible.
2. Alternative approach
An alternative approach simply means offering a different way of solving the same problem your competitors are solving. In most cases, businesses will work similarly, so offering a different solution helps you stand out and potentially be identified as an innovator.
3. Shared value processes
Values are at the core of the buying decision for many buyers. One way for brands to earn a loyal following is by highlighting the values they hold true so customers can connect with them. Toms, the famous shoe brand, is a great example of a differentiation strategy based on values.
Additionnal resource: Showing customers you care
4. A shared journey
Customers are ultimately looking for a solution to their problems. What better way to earn their trust than by having been through the same challenges, faced the same difficulties, and achieved the result the audience is striving for?
5. Industry recognized expertise
Industry-recognized expertise is one of the oldest, most effective differentiation strategies companies still rely on today.
An industry expert or leader is an effective foundation for a brand to build its reputation. Chefs and entertainers often rely on this strategy to back business ventures like restaurants and lifestyle brands.
Additional resource: Ryan Wetherby's EWF 2.0 Review
6. Unique pricing structure
This differentiation strategy consists of presenting the customer with an alternative to the way your competitors normally charge. For example, Sprint is famous for its no-contract plans for wireless service.
7. Customer status
Having a portfolio filled with recognized clients is a sign of trustworthiness.
By highlighting your customers’ high profile, you get to build a reputation on the reputation of those that have already trusted you.
That’s the reason websites often have a section that mentions high-achieving or recognized clients.
8. Quality-focused differentiation
A quality-focused differentiation strategy is based on the notion of steering the focus away from factors like pricing, which is often a big area of competition, and on to the high quality of the products you sell.
Using a quality-focused approach to your branding can turn you into an industry standard. This differentiation strategy is especially effective in industries where low quality is the norm. You can identify gaps in service through customer review sites.
When Chipotle entered the fast food industry, they stood out from competitors like Taco Bell by focusing their marketing on the quality of their products, which was enough for customers to justify their higher prices.
Steps for creating a brand differentiation strategy
1. Research your audience.
As with any branding strategy, the first step to creating a differentiation strategy is researching who your target audience is. Once you understand them, you’ll be in a better position to speak directly to them.
Understand your audience by defining their demographics, their goals, their pain points, and their current habits. What is your competitor doing to alleviate their problem? How are they succeeding at solving the pain? What are they not doing?
2. Conduct competitive analysis
Your competitors are the companies meeting the wants and needs of your defined audience. So it’s crucial to have a good grasp of your audience first. When you know who your audience is, you see competitors in a different light.
Competitor analysis goes beyond their product and marketing. You want to dig into their strengths and weaknesses by experiencing their brand firsthand.
Immerse yourself in their product, test it, sign up for a demo, request samples, and go as far as you can through their buyers’ journey to understand how your target audience lives the solution.
The better you understand your competitors’ strengths and weaknesses, the better positioned you’ll be to compete with them and solve pains in a way they can’t.
3. Identify gaps & opportunities
While doing competitive analysis, you want to spot the areas your competitors aren’t meeting your audience’s wants and need as effectively as they could be.
You’ll get a sense of this by diving into their brand experience. Is their signup process a pain? Did you experience friction with their customer service? Is there a feature you’re sorely missing?
Go beyond the data and find the insights that’ll expose how you can better cover the gaps your competitors are leaving.
4. Define your difference
Once you understand your audience and competitors, it’s time to analyze the viability, difficulty, and profitability of the opportunities you found.
A truly effective differentiation strategy has to add value and enhance your audience’s experience.
But it also has to have a positive impact on the business by increasing your revenue, market share, brand awareness, or another business objective.
Fulfilling a want or a need is not enough to earn your audience’s attention
The only way you’ll be able to attract the right audience who values what you do and has the potential to give you their loyalty is by clearly defining the difference you have to offer and providing them with an alternative to what’s already out there.
Undoubtedly, a brand differentiation strategy is a must for any company wanting to stand the test of time. Without it, you’re just another business adding to the noise.
Author:
Stephen Houraghan
Founder & Brand Builder
Brand Master Academy