In the 1990s, differentiation did not need to be defended, because its absence had raised fears that a mass-marketed product with changing demand would lead to weaker consumption. It was thought that a rapid advance or an innovation could not generate a lasting success and the great fear that played against the differentiation, was the theory that the price did not affect the sensitivity, nor the growth of the brand.
As the population grew, brands needed to find additional buyers to maintain the same level of penetration. To put this in context, population growth, 1% global penetration today is almost 1.8 million more households than 10 years ago. Maggi, for example, had to find 6.75 million buyers, just to keep its penetration level intact. They did that and more, that is, they found additional buyers to this number and that is why their penetration grew.
In the Brand Footprint 2022 report, it was shown that only brands that increase their market penetration can achieve consistent growth. In data collected by Kantar and GfK, considering actual purchases and survey ratings across multiple markets, it is noted that penetration and engagement are often a consequence of differentiation. They conclude: “Penetration is most affected by brand differentiation (average elasticity of 0.22), awareness and satisfaction (average elasticity of 0.21) and, finally, perceived value (0.11) means that, an improvement in differentiation of 10% and an increase in penetration of 2.2%”.
The pricing power of a brand is the most important factor for investors like Warren Buffet. This is because a brand with strong pricing power is less likely to be switched to a cheaper alternative and more likely to get better margins for your business.
PricingPower is not an overnight miracle, it is business muscle that is built over time.
Various studies show that the difference plays an important role in building profits, since the significant difference represents 94% of the pricing power of a brand.
When it comes to current sales, that is, being chosen today, differentiation again still contributes, even though it accounts for a fifth of a consumer’s buying decision.
Products or services can be copied, prices matched, distribution eventually maxes out. One thing we can control is our relative differentiation in the minds of consumers. After all, one of the many definitions of “brand” is not to be equal to other options.
Fountain:
Dancing to the rhythm of brand differentiation. (nd). https://www.kantar.com/inspiration/brands/dancing-to-the-rhythm-of-brand-differentiation