Differentiation Strategy: The Definitive Guide (Best Brand Examples)

So you’re developing a brand and you want your target market to choose you instead of your competitors right?

Of course you do, that’s the whole point of branding.

As flash a a modern and clean identity might look, without a reason to give your audience to choose your brand over your competitors, it matters not.

This is where the differentiation strategy comes in.

In this article, you’ll learn what a differentiation is and how to develop a strategy for your brand.

How To Create A Differentiation Strategy (Process Steps & Examples)

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What Is Differentiation Strategy?

Well, in a nutshell it’s the strategy that defines your difference.

That sounds a little simplistic so let’s break it down.

Markets are full of people who want or need a service or product. Serving that market are brands providing a solution to that want or need.

Each competing brand will fulfil the want or need of the market, though how they do that is more often than not, the defining factor in the buying decision.

Fulfilling the want or need is just table stakes. 

The unique experience en-route to that outcome is the differentiation strategy and ultimately the reason you provide your audience to choose your brand over your competitors.

Why Is Differentiation Important?

When we buy goods or services we want value for our money.

Every person’s situation is different so some customers may prioritize quality over price than others or vice versa.

But there are many more possible buying considerations a market may have beyond quality and price.

Some may be short on time and place a high value on convenience while others may have plenty of time and place a higher value on the overall experience.

The list of buying considerations in a given market may be long.

The differentiation strategy defines which buying considerations a brand focuses on with a view to attracting a more specified segment within that market who want what they have.

The differentiation strategy highlights the focused buying considerations the brand has selected to match its intended audience.

A brand without a differentiation strategy has an audience without a reason to choose them.

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The Competitive Advantage Of Differentiation

When a brand provides their audience with a compelling reason to choose them over their competitors, by nature, they have a competitive advantage (provided the difference they claim to have is backed up).

Every business wants a competitive advantage over their rivals so they can attract more of the market share towards their brand and away from competing brands.

A unique and compelling difference that the audience values represent a major competitive advantage. The more defensible this difference is, the more valuable the advantage.

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Types Of Differentiation Strategy

There are many ways to differentiate one brand from competing brands.

The most obvious is price differentiation though competing on price is a dangerous game as a competitor can always undercut on price making the competitive advantage redundant.

There are however, many more ways to differentiate including; but certainly not limited to the following:

Product Differentiation: Examples include; features, performance, efficiency, effectiveness, durability, reliability or warranty etc.

Service Differentiation: Examples include; Delivery, installation, convenience, accessibility, production value, customer service etc. 

Channel Differentiation: Examples include coverage, expertise, performance, accessibility

Relationship Differentiation: Examples include Competence, courtesy, credibility, reliability, responsiveness, communication, support

Image Differentiation: Examples include brand identity, personality, tone of voice, brand attributes

Experiential Differentiation: Examples include content marketing, education, user experience, customer service, checkout experience, brand activation, interactive engagements

Broad Differentiation vs Focused Differentiation Strategy

There are many different ways to differentiate and there is no one size fits all approach.

Two of the overarching strategic directions are broad and focused differentiation.

The size of the market and the goal of the brand should influence which direction the brand takes.

Let’s have a look in more detail.

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What Is Broad Differentiation Strategy?

Broad differentiation strategy is when a brand aims to differentiate itself from the competition while appealing to a broad market.

This tends to be more difficult as there are more competitors across broader markets and less opportunity to appeal directly to specified segments.

What is Focused Differentiation Strategy?

Focused differentiation strategy is a narrower approach. With this strategy, brands will aim to appeal to a more specified segment of the market.

Through specified and relevant features of product and service offering to more relevant outcomes, the focused strategy gives brands more relevancy to a smaller or niche market segment.

Differentiation Strategy Example: Whole Foods

Let’s take a look at a differentiation strategy example from Whole Foods.

Whole Foods core difference is the organic and natural characteristics of their products, yet they haven’t gone so niche that they only appeal to a small segment.

Whole Foods strategy is broad because they target all market segments and products are suitable for all customers regardless of age and gender. 

Because they target all market segments and their popularity and broad appeal has allowed for the monumental growth of the brand, avoiding limitations of smaller or niche markets.

Benefits Of Developing A Differentiation Strategy

How To Develop A Differentiation Strategy

Developing a brand from purpose to difference to personality and identity is all about systems.

When you have step-by-step repeatable processes to follow, that’s when you can achieve the best results and find consistency in the quality of your work.

So let’s take a look at the step-by-step process you can use to develop differentiation strategies for your brands.

Step 1: Define Your Audience

Before defining a difference, you need to understand exactly who you’re appealing to so you can define a difference that’s most likely to appeal.

This is where many brands fail. They put the cart before the horse, define a difference and then try to make that difference fit the audience.

If you approach your difference in a customer centric way by understanding their wants, needs, challenges and desires then you can design a difference to speak to who they are and what they want.

Step 2: Conduct Competitive Analysis

When you know who your audience is, you can see your competitors in a brighter light.

These are the brands who are already meeting the wants and needs of your defined audience and the better you understand their strengths and weaknesses the better you’re positioned to compete.

To do this effectively you need to become the customer and experience these competitors as immersivity as you can. The deeper you go into their customer journey and brand experience, the more insights you’ll find.

Step 3: Identify Gasps & Opportunities

Conducting competitive analysis is not about finding what your competitors are doing well and replicating them. It’s about identifying where they’re not meeting the wants and needs of your audience as effectively as they could be.

Effective competitive analysis uncovers insights yet these are only insights. To uncover gaps and opportunities needs time, attention, exploration and creativity.

Deep exploration from these insights are where market disruptors are born.

Step 4: Define Your Difference

Once the opportunities have been defined, they need to be put under a microscope to analyse the viability, difficulty and profitability.

An opportunity may exist that is out of reach due to the difficulty of execution or may be easy to execute but lacks profitability.

A truly effective differentiation strategy must add value or enhance the experience of the audience while allowing the brand to revenues and market share.

Over To You

There are more businesses in more markets competing for more customers than ever before in history.

Fulfilling a want or need is only the beginning but in this noisy market landscape it most certainly isn’t enough.

Only when you define a difference that provides an alternative that the audience deems valuable, are you in with a shot at attracting the right audience that values what you have.

Otherwise, you’re just another business making up the numbers and contributing to the growing noise in the market.

Are you differentiating your brand? Comment below to share your thoughts and experiences.

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