MY ARTICLES
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SERIES:
BRANDING
- WHAT IS A BRAND EXTENSION?
- WHAT IS THE BRAND IMAGE?
- WHAT IS CAUSE MARKETING?
- IS NEGATIVE PUBLICITY ALWAYS NEGATIVE?
- WHAT IS THE DIFFERENCE BETWEEN A BRAND, BRANDING, A PERSONAL BRAND AND A COMPANY/PRODUCT NAME?
- WHAT IS CROSS-MARKETING?
- WHO IS RESPONSIBLE FOR MANAGING YOUR COMPANY'S IMAGE?
- WHAT IS BRANDING?
- HOW TO SELECT YOUR COMPANY NAME?
- HOW TO MAXIMIZE THE VALUE OF YOUR SOLE PROPRIETORSHIP BUSINESS
- WHY IS PRODUCT DIFFERENCIATION IMPORTANT?
- RIGHT SELL AND OVER DELIVER
PRODUCTS / SERVICES / COMPANIES DIFFERENTIATION
NEXT ARTICLE: RIGHT SELL AND OVER DELIVER
One of the courses that stuck with me during my studies in Marketing and Business Strategy is the course in Managerial Economics. One of the key sentences of this course was:
« All things being equal in all aspects, the predominant factor which will differentiate between two identical products is the price ».
Such a simple sentence, yet filled with very important realities that I continue to use today.
One of the things this sentence says is that in the absence of differentiation between products or companies, what is going to influence the customer's decision towards one option or another will be the price.
Not convinced? Let us go to a public market to do some shopping. Let us consider two tomato vendors. It is 9:00 AM and the two kiosks are next to each other. If the tomatoes are the same from one kiosk to another, that the service is the same on both sides, there is no difference in the time it takes you to get to one kiosk or the other, and the other aspects are virtually identical, you will buy the cheapest tomatoes.
Now if you say:
Getting away from price wars is why having a brand is important. In the in-depth article on how to build your brand using differentiating factors, we look at the elements on which a good brand should be built. Saying that we are the best is not an advantage and your brand cannot be built on that simple claim unless you have a significant advertising budget. Your budget will become your competitive advantage. This is kind of the model that the perfume and cosmetics industry uses; a significant percentage of their revenues is devoted to advertising, which includes association with renowned actors, sports celebrities, or artists.
Another example, still in the food industry, but which I recently experienced. I used to do my grocery shopping at Super C, a known chain here in Quebec. I had not invested a lot of time in my choice; the grocery store is close to me, the service is good and the prices seem to be reasonable. But a bicycle accident kept me from being able to go to the store for a while. I had to do my grocery shopping online. The first suggestion came from my kids: Walmart. Without having time to research, I did some shopping with them. Unfortunately, orders were rarely complete (missing products) and the quality of the products was not always there. Enough to force me to look for an alternative. This is how I found; Metro. When I compare my weekly groceries price, I spend more with Metro than with Walmart, and Metro charges for order assembly, which Walmart does not do. BUT, my order is always complete. If it is not, the system sends me an email to tell me what will not be included because of lack of stock, and it tries to find alternatives (it is an in-app choice). In addition, the products are ALWAYS fresh and the delivery people, wearing Metro’s colors, are very courteous, respectful, and professional. Walmart uses subcontractors as delivery people and the deliveries were sometimes good, sometimes not so much. By focusing on ordering accuracy (arguably a complex logistics) and great service, they got me as a client, even at a more expensive price. Now that I healed, I am continuing with them. By emphasizing differentiating factors, they were able to distance themselves from the price variable in a hyper-competitive field.
Building a competitive advantage that will not be replicated tomorrow by your competitors is a complex and difficult process. Otherwise, everyone would do it. But the reward at the end of the exercise is more latitude with the price variable.
Does that mean you can charge whatever you want? No, there is something called “price elasticity”. A phenomenon that underlines the tolerance your customers will have to pay more before leaving to your competitors. This elasticity is based on several factors. The strength of your brand, or the loyalty of your customers to your business are important factors. Also, there is what your competitors are doing in the market. The more active they are, the less your advantage over them will be. There is also your industry. For some products/services, product differentiation is very difficult. I remember meeting with the CEO of a company that produced frozen French fries. A hypercompetitive field with a very low margin and a relatively low level of loyalty. So, depending on your parameters, investing in your differentiation can be a good idea for you.
In my Metro example, their strategy is interesting because the company left the grocer retailers market and created a new market: the online grocers market. Most grocery stores have an online “option” (Yet I was surprised when I did my research, the few options in my area), but the level of development is much less than what we have with Metro. My little neighborhood Italian grocery store offers the ability to shop "online", but you have to go to an outdated website and call to order. A valiant effort from a small neighborhood grocery store to provide an alternative for people who do not want to go to the store, but perhaps not the best online option.
However, my little Italian grocery store has its differentiating factor: imported products. Bulk olives, a huge selection from the deli counter, pasta options, olive oil choices, a large selection of cheese, and so on. If you love to cook, this grocery store is for you. And what's more, the "family" atmosphere is very nice. I love going there.
How can this apply to your business?
If you have not already done so when you started your business, you need to reflect on what it is you do for your clients, and how are you doing it differently from the other options out there. Generally, the options revolve around:
Provide a solution to a problem: do you know how to do your taxes? I do not. So, I hire an excellent accountant to solve this facet of my life. I could make an effort to learn, but I feel my time is better spent elsewhere. What solution do you bring to what problem?
Improve well-being: there are so many facets to this dimension. But one of those can be seen in the efforts made by big retailers and SPAs to make their places a "destination" where you want to go, where it feels good to be. Not all activities should be done from the comfort of your own home. Nowadays, with Zoom, you can do your workout in your living room. But for many, there is the social aspect of real-world group training that you just do not find in your living room. Do you like the people with whom you do your Yoga? Is your session as good for your body as it is for chatting with friends? What do you do to make people like to come to you? Sometimes it is simple. In my little Italian grocery store, the owner would walk around with a particularly good bag of grapes and offer them to people. Food tasting in grocery stores is nothing new. This is common practice. But it was the first time I saw the boss do this. A very nice gentleman in a suit. I bought the grapes.
Simplify life: home delivery is more and more an aspect that we must have. People have realized the productivity gain of not having to travel to buy something. If the purchase is not urgent, with a few clicks, it can be there in a few days. In this reality, two things stand out. Delivery is essential and if that is not your direction, having a good inventory position of certain products is an option. Last-minute purchases on a few must-have products can be a competitive advantage if you can identify them and having them in stock is possible.
Save: When all options for differentiating factors have been exhausted, your market has adapted, or you are in a field where differentiation is not possible, "price" might be the only option. When put to good use, it can become a great competitive advantage. Think of the Dollarama of this world. Having a great sourcing strategy and passing it all on to your customers can be a great idea. And you do not have to do this on all of your products. Some flagship products can convince your potential customers to become customers.
If you have any questions or comments, please do not hesitate to contact me.
Stéphane Elmaleh-Riel, B.Ed., MBA
Marketing consultant