Competing On Price, Not Differentiation

Allen AdamsonApril 22, 20223 min

A key objective for all brands is to create a promise that customers value at a level significantly greater than a price that includes not only cost, but a reasonable margin as well. Products that create such value for their customers have the potential to dominate their category.

However, companies cannot deliver such value in perpetuity. Innovative competitors will derive ways to deliver similar or superior value to some market segments. As powerful as the New York Times has been for a long time, the Wall Street Journal delivers news more suited to the business community. Brands must react to these dynamics lest they whither in decline as Pan Am, Blockbuster, Woolworth’s, and Borders have done.

A thought leader in helping businesses understand and mine the relationship between their customers and their brands, John Gerzema, told us,

“Branding and growth is a series of constant small risks in decision making. You cannot get to the point where you have waited too long without taking any risks. You’ll basically have to throw a Hail Mary.”

If you don’t make significant shifts at some point, you will find that the only way to keep sales going strong is to adjust the price. If price becomes too important a competitive weapon, it’s likely that your brand’s point of relevant differentiation is diminishing in the minds of consumers. If they can’t see what makes your product or service any different or better, why would they pay more than they had to? Unfortunately, by the time the folks in the C-suites catch on to this idea, a Hail Mary pass might be too little, too late.

John Gerzema again,

“We live in an age of ‘compressed change.’ Brand building is completely different from the way it used to be. Positioning used to be planting a flag and stepping back. Now the terrain is moving at such speed and ferocity that it’s difficult to think in a static way about positioning. Erosion is critical to track. You have to be able to figure out why consumers are falling out of love with brands. Consumers don’t just want brands to be different and relevant, but to keep being different and relevant. …. Successful brands recognize this and know it’s not a place, it’s a direction. They must constantly evolve, not stand still.”

What we found in our research was that if a company began to address the need to shift the minute there was a slight drop in relevant differentiation scores, they had a fair chance of successfully shifting. But the vast majority did not start to address the relevant differentiation issue before the runway ran out. In fact, many companies don’t even track their organization from a brand equity point of view. Not smart. Brand value matters a lot. Heed this red flag.

Contributed to Branding Strategy Insider by: Allen Adamson and Joel Steckel. Excerpted from their book Shift Ahead: How The Best Companies Stay Relevant In A Fast Changing World

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