Differentiation AND Relevance Maximize Brand Value

A while ago, I wrote a post about the necessity of a product or service being Cheaper, Better or Different, in order to be a successful brand: http://bit.ly/dVppWy

By occupying one of these three points on a positioning triangle, the best-of-class brands occupy a different reason for being in a consumer’s mind.  WalMart is an example of Cheaper.  Target is Better and IKEA is Different.   If a brand is undifferentiated in any of these three ways, it falls into the undifferentiated middle, or Bermuda Triangle of consumer perception.

A customer/consumer buys an undifferentiated brand only when the preferred choice is out-of-stock or too difficult to obtain.  While being the second choice may be a good position for a while, this brand either loses distribution due to poor sales or is knocked out of the category by other competitors who are cheaper, better or different. 

Look at what happened to AOL.  They were the category leader by a significant margin, but never upgraded or innovated, thus losing their first-mover advantage and falling out of their target consumers’ consideration set. 

While doing some spring cleaning in my office, I came across a positioning chart that used Differentiation as the x axis, and Relevance as the y axis.  It was so simplistic that I nearly threw it out.  Then I realized that its simplicity was its brilliance.  After a brand chooses to be Cheaper, Better or Different, it must also be Relevant to its target audience.

The chart illustrated that the more differentiated and the more relevant the brands’ positioning was, the more price inelastic was the brand value.  In simple terms (for those of us who can’t remember which is better: being price elastic or inelastic) a brand that maximizes differentiation and relevance has very few, if any, competitive substitutes.  Therefore, loyalist value the brand highly and won’t buy a back-up option, but instead search other stores or online until they can purchase the favorite brand.  Think Apple.  What competitor is a substitute for an Apple loyalist?  None.

Thus differentiation and relevance lead to higher profit margins for the brand, higher sales and brand success.  Isn’t this what we’re all searching for?

The lesson of this graph is that positioning alone won’t guarantee a brand’s success.  Relevance is equally important and the two together maximize brand value.  Simple!

Thanks to Stern Stewart, originator of the graph and The Cambridge Group for passing it along.

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