January 14, 2021
The art of differentiating with good intentions
If you’ve ever tried looking up the definition of branding, or have gone as far as researching steps on how to build a brand; you were likely to enter a vortex of many confusing, and often contradictory explanations.
Many will tell you branding is about standing out from the rest. Others will say, branding is all about your logo, voice, and tone. It’s a promise. It’s your personality. It’s the story you tell.
If this left you feeling more confused than when you had first started; you are not alone.
In an attempt to demystify branding, I had spent the past couple decades implementing and testing the many theories, methodologies, and recommended practices while working on some of the worlds’ leading brands; culminating the what and why in the following conclusion:
Branding is intentional differentiation.
Differentiation can be explained by three questions. If you can’t answer these in a way that’s appealing to customers, then you don’t have a brand: 1) Who are you? John Deere makes tractors and related equipment. 2) What do you do? They make tractors and related equipment. 3) Why does it matter? It doesn’t really matter what they’re doing; people just want the products because of the company name on them.
If you say that your company makes important products, then you have nothing. It is not special or different. You have to find a better way of answering the question so that it sounds unique and interesting. John Deere would argue that they are successful because farmers trust their equipment and they’ve been around for generations. This gives them an edge over other companies who just sell “important” stuff. If John Deere started selling houses, it would be just another real estate company and lose its differentiation in the market place because there are others out there doing exactly what they do but with more focus on one particular area than the other company has done before.
Brand leaders have the highest profit margin.
Nike charges around a $110 dollars for a sports shirt that you can get somewhere else for $30. Apple charges significantly more for its computers with similar specs than it's competition. People do not buy what you sell, they buy why you do it.
When customers attach a level of quality or prestige to a brand, they perceive that brand's products as being worth more than products made by competitors, so they are willing to pay more. In effect, the market bears higher prices for brands that have high levels of brand equity. The cost of manufacturing a golf shirt and bringing it to market is not higher, at least to a significant degree, for Lacoste than it is for a less reputable brand. However, because its customers are willing to pay more, it can charge a higher price for that shirt, with the difference going to profit. Positive brand equity increases profit margin per customer because it allows a company to charge more for a product than competitors, even though it was obtained at the same price.
A brand protects a company and its products, like an extra layer of insurance.
If you can't out-inovate your competition, out-brand them. Coca-Cola and Nikle are perfect examples of a commodity products that pretty much any company can copy. There is only one crucial aspect, that can't be copied, and that is their brand. Coca-Cola is worth $70 billion. 60% of the total value comes from the Coca-Cola brand.