Sunday, April 25, 2010

Marketing Strategy : The Difficult Task of Differentiation

The Difficult Task Of Differentiation

Originally Published here in

Marketers are a worried lot. The market is flooded with similar products and offerings which has created a huge clutter of brands and products. The situation is worse in markets where the entry barriers are low. Added to this is the entry of private labels by retail giants to cash in on the consumption opportunity.

Take the case of the soft drinks market in India. The market is flooded with desi and foreign brands with similar flavours and product properties. This summer is witnessing fights over mango and lemon flavours. The brands are segmenting and micro-segmenting the market with every possible variable.

For a marketer, this situation has multiplied his marketing expenditure. The focus is on outsmarting the competition by grabbing more share of voice. To standout from the crowd, marketers are using every tricks of trade. Instead of one celebrity, now a team of celebrities are endorsing brands. Consumers, on the other hand, are overwhelmed by this plethora of brands. Instead of simplifying the purchasing process, brands are now confusing consumers by choices.

For brands, the abundance of choices creates a huge problem of differentiation. Differentiation based on product features has become a difficult task with competitors taking no time in copying /adopting that feature. Differentiations based on incremental product improvements /features have become difficult to develop and sustain in the market.

In an era where companies expect brands to be successful with in three months (quarter) and brand managers being evaluated on their quarterly performance, creating sustainable long-term differentiation strategies are not in vogue.

The current economic situation has now forced many marketers to rationalize their portfolio and cut the flab. It is time for Indian marketers to go back to the basics of creating sustainable differentiation strategies for their brands.

Invest in R&D

India is a R&D and product development hub for most of the MNCs but seldom Indian marketers were able to create breakthrough products for the Indian market. Tata Nano has shown the world what Indian minds can do when inspired. A project which was labelled ‘ Impossible’ by many analyst is now a reality. Nano is a lesson to all marketers. This product was created from a need and backed by conviction and support from the top management.

It is not easy and the Nano example shows the myriad of issues one can face when venturing into creating something original. But the effort is well worth the results. The market is moving in a direction where only those brands will succeed who can innovate.

Protect the Differentiation

An important determinant of a successful differentiation is the brand’s ability to protect the differentiation. Patented features are powerful differentiators. But it is very expensive and time consuming process to patent features. In the case of FMCG products like soaps , such kind of patents are not a viable proposition.

Smart brands use ingredient branding to protect their key differentiators. Ingredient branding is where a particular product feature or an ingredient is branded by the company. There are two kinds of ingredient brands.

One type is where the ingredient is owned by another company. Intel is a pioneer in ingredient branding. Intel has built ingredient brands like Pentium, Celeron, Atom etc .These are not standalone products but ingredient of computers. By creating powerful ingredient brands, Intel has successfully created a space for itself in the consumer’s mind.

Another type of ingredient branding is where the feature/ingredient is owned by the company itself.Bajaj has a powerful ingredient brand DTSI ( which is also a patented technology) which it now uses for all of its two wheeler brands.

The ingredient branding strategy helps firms protect their critical innovations or even benefits. These ingredient brands can be copyrighted which will prevent competitors from copying these innovations.

Connect to a Relevant Need

Creating a sustainable differentiation is possible only when brands become customer focused. Most differentiations that we see in the market are product oriented. When products become standardised, it is important for marketers to create differentiation focusing on consumer needs.

Brand laddering is a strategy that can be used by marketers to create differentiation on a need rather than on a product feature. Raymonds is a brand that has created a space for itself by effectively laddering up to a customer need ( Complete Man). The benefit of such a strategy is that competitors will find it difficult to copy the differentiation since it is based on an intangible attribute. The brand has created a unique powerful image which is sustainable over time.

It is also important for the differentiation to be relevant to the consumers. When connecting to a need, marketers should ensure that the need is highly relevant and will fill in a very important gap in his life.

Long Term Vision through Brand Charter

Brands will take time to establish and marketers should be able to give some breathing space for the brand to discover itself and connect to the consumer. It is important for marketers to create a brand charter which will spell out the long term vision for the brands, its differentiation and positioning platforms, guidelines and strategies.

Such a brand charter will guide the future brand managers to create tactics which are in line with the overall brand vision. If a brand chose to create intangible differentiation opportunities, there has to be a consistency in the brand’s positioning and differentiation strategies. Brand Charter will help bring consistency which will inturn facilitate create a sustainable differentiation.