Differentiation: A Surprising Story of Sameness

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If anything could be considered sacred in business, differentiation would be a top candidate. “Differentiation,” the method marketers use to demonstrate differences between products, is pursued with grail-seeking zeal by companies interested in beating the competition. Mintier mouthwash, infinitely absorbing paper towels, longer-lasting batteries, ever-sharper razors, crunchier chips, driest bottom diapers…and on and on.  But what have decades of relentless differentiation brought consumers? Unprecedented homogeneity.

You’d have to be a true expert to tease out any meaningful difference among dozens of detergents, cars, cereals, enhanced waters, or running shoes. Somehow, the pilgrimage to differentiation got hijacked, and many marketers ended up in the land of “me too” lookalikes.

Given the number of great companies that have become lost in the herd, there must be some basic weakness to this philosophy. Imagine that you’re playing host to a friendly alien guest who asks you to explain the distinct benefits of each brand of toilet paper in your local grocery store.  Perhaps more brand managers should play the alien game as a simple reality check.

The explanation for the white noise, in the toilet paper aisle and most other aisles as well, is disarmingly simple: Differentiation may be top of mind for marketers, but it’s just not that important to consumers or the choices they make. Consumers seek products and services that resolve their everyday needs – not differentiation.

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Where Marketers Go Wrong
Differentiation is exhausting stuff – trench warfare over market share. Brands leverage fleeting advantage to grab a point here only to lose it over there. In the heat of combat, companies can become so attached to the struggle that the competition – rather than the customer – dominates the way they view the world and produces curious behaviors across many categories.

The very concept of a category intensifies the focus on competitors rather than consumers. Companies in the beverage industry focused so much on battling each other, for example, that they missed the energy drink boom. Yogurt companies duked it out until start-up Chobani grabbed the majority of the category’s growth. The simple truth is that category definitions often hold very little meaning in the daily life of consumers. Winning brands focus primarily on consumers, not competitors.

With category blinders on and focus trained on lookalike competitors, innovation often regresses to a narrow spectrum of attributes: Cereal A has 15 grams of sugar, so Cereal B cuts it to 10 grams. Razor A has four blades; Razor B now has five. Light Beer A only has 110 calories, then Light Beer B joins the fray with a 95-calorie offer, but then Brand C steals the march with a 64-calorie beer until the brewer of Brand A retaliates with a 55-calorie variant.

Successful brands, however, do not exist in order to beat the competition any more than they exist to be profitable. Outperforming the competition is the consequence of a deep understanding of consumer demand and desires. The alternative to the zero-sum struggle is to set aside traditional notions of category and competition and totally get immersed in the lives of consumers.

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Centering on Circumstances
The context of the consumer is the swirl of daily life and not the crisply defined categories in which brand managers live. Marketer attachment to those categories only impedes meaningful innovations and exacerbates the race to sameness.

But by focusing on the consumer’s job-to-be-done, remarkable opportunities can spark to life even in “mature” markets. Take ING Direct, for example.

In the late 90’s, financial services giant ING surveyed the crowded consumer market and realized that many consumers struggled with a very basic job: saving. Banks had grown into enormous, full-service, one-stop-shops, accumulating overhead and operating costs that made it unattractive to pay small depositors meaningful rates of interest. Savings accounts were a “lose-lose” – unappealing to banks and consumers alike.

ING Direct turned industry wisdom on its head by launching a brand focusing on this “crummy” market. They aligned with the very specific consumer job of saving. Banking was online. Product offering was narrow. Because costs were low, ING could offer compelling rates of return. What appeared to be a small, stagnant market was actually a substantial and largely untapped opportunity when viewed through the lens of consumer need. The market only looked small because traditional savings accounts did such a poor job of helping consumers grow their savings that they used other products, like real estate, index funds, and savings bonds. ING Direct transformed the business from a lose-lose into a win-win, and in 2011, Capital One bought ING Direct for more than $9 billion.

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The runaway success of Chobani yogurt is another example of an innovative new entrant that gained fast success by cracking open category shells. Chobani resolved a historic tradeoff between a rich, satisfying taste experience and healthfulness. It was delicious, full of protein and active cultures, and lacked the high fat and calories usually associated with rich, satisfying yogurt.

Chobani broke the category mold in its marketing as well. Other brands had become very focused on functional benefits – touting immunity, regularity, bone health, and weight management. Chobani avoided the yogurt-is-for-women box and restored focus to the main reason consumers of either gender buy yogurt:  It is delicious, satisfying, healthful, and convenient.

As these examples illustrate, viewing the world of opportunity through the eyes of the consumer can bring new life to a previously unsuccessful category of products. Perhaps paradoxically, setting aside traditional notions of competition is exactly what brands must do if they want to win consumers’ favor.

The trouble with differentiation is that it takes a currently available product as its reference point. Successful innovation is not about offering a variation on a theme; it is about improving the lives of consumers. Brands do not achieve success by being different.  On the contrary, brands are meaningfully different when they perfectly perform important consumer jobs. Successful brands weave themselves into the fabric of daily life. Other brands would be wise to follow by working to understand consumers a little more and obsessing over competitors a little less.

Taddy Hall is project director at The Cambridge Group, senior vice president of Global Practices and Consulting Services at Nielsen and a recognized authority in the fields of marketing, innovation, branding, and competitive strategy.

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