Differentiate - How to differentiate in a commodity world (part 2 of 2)

Note: This is part 2 of a two-part paper. For part 1, click here.

DEFINING FACTORS

Products need to show differentiation to sustain themselves in the marketplace. The only differentiation of truly commoditized products is price. They compete on price alone as the rest of the features are fast copied by the competition. A true differentiation (in addition to price) goes a long way. In the 1990s and early 2000s, Hewlett-Packard (HP) raced ahead of other computer manufacturers like Dell, Lenovo, Sony, etc. by focusing on services too.?Differentiated products are sought after by the fans. Many times the fans are fanatically loyal. Owning or using a differentiated product delivers dopamine to the fans that makes them happy.?

We are impressed with some differentiated products like Mercedes, BMW, Zappos, AWS, Apple, Nike, Rolex, Wholefoods, Google, In-N-Out, Disney, Intel, Marlboro, Starbucks. There are more. It is a long journey for a product to reach the status of being differentiated. But it is easy to fall off the differentiated status easily because of miss-steps. Wells Fargo (Account fraud scandal), Coca-Cola (New Coke formula change), Audi (emissions fixing) are some. And it takes a long time to come back.?

How to become and stay differentiated? We feel that a product is truly differentiated if they have an emotional connection with its fans. The differentiated products need to be entrenched in the consciousness of society.?The current and future potential customers should feel an emotional connection with the product. Harry Potter books are a craze among the youth. Young readers would stand in line in the middle of the night to get access to their copy. Some of them want to start reading the book right away in the parking lot or on the drive back home. In 2007, Harry Potter's U.S. publisher Scholastic sold 8.3 million copies of the final book, Harry Potter and the Deathly Hallows, in the first 24 hours. The book series inspired eight movies between 2001 and 2011 that, combined, grossed $7.7 billion worldwide. In 2012, Rowling launched Pottermore.com, a site that offers new Harry Potter content and interactive experiences. The site reportedly had 1 billion viewers in the first two weeks it went live. Roughly 450 million Harry Potter books had been sold in 73 different languages as of mid-2013, making it the best-selling book series of all time. Rolling Stones recollect a similar emotional connection among music lovers when they move the music world from rock to hard rock.?

In his famous article and his book on How brands become iconic, Douglas Holt argues that cultural connection paves the way for iconicity. Harley’s bikes connect with the manly and independent streak of their riders. Snapple espoused their rebellious and anti-corporate culture of products with a focus on “common-man who wants to enjoy a drink”. Starbucks' fierce focus on the relaxing aroma of coffee when you enter a Starbucks cafe was a differentiator. Marlboro targeted men who wanted to smoke and highlighted their manliness by initially showcasing sea captains, riders, weightlifters, construction workers and later sticking to cowboys and motor racing. Jack Daniels?associated its brand with celebrity ads. The historic black and white print Jack Daniels ads created its sense of independence and differentiation. Check the famous Jack Daniels ad that says “56 men signed the declaration of independence, one man put it in a bottle”.?Nike, the name derived from the goddess of victory, focuses on how it lifts humans to victory. Coca-Cola's iconic fame to provide “a refreshing drink” expanded further when the company designed “the bottle so distinctive that you would?recognize it by feel in dark or lying broken”.?

Recently born brands like Apple, Google, Facebook, have reached iconic status. Apple users’ frenzy to buy the latest and expensive mobile phones, Facebook’s one billion users accessing the platform for sharing, and the fact that the word “to Google” is used as a verb to mean “to search”, shows how deeply the brands are entrenched in the daily lives of fans.

But how to become differentiated? Can companies do it in a short time? Should they spend billions on marketing? How about making it very expensive or how about giving it away for free? Get celebrity endorsement or should one just rely on word of mouth? Though the above factors may be essential to be a differentiated product, we repeat our earlier assertion that just complying with the hygiene factors does not help. There are a lot of examples of products that indeed do a good job in price, quality, etc. but are not necessarily differentiated.

We feel that none of the above ideas make a distinct impact on the brand to make it differentiated. Many brands have used the above ideas to some or large extent. We propose to develop a framework on what may be the required steps to be taken by brands to become differentiated. Our hypothesis is that while maintaining an excellent track record of implementing the hygiene factors (listed above), enterprises have to master the emotions connected with fans.

Trust?

In one survey in 2020 about the most trusted brands, Amazon and Google as brands are more trusted than Teachers, Scientific Studies, the News Media, the US government, and Wall Street. In another survey in 2018, Amazon is more trusted than the Military, US Government, Congress, the Supreme Court, State Governments, Religion, Press, Banks and the FBI. Pause and digest this statement. Is Amazon more trustworthy than the Supreme Court and Congress? Trust takes a lot of time to build and is a difficult uphill battle. But it is easy to lose. Trust can also be enhanced by doing the right thing as a corporate citizen.?

Great acts of a corporation as part of Corporate Social Responsibility goes that extra mile. Starbucks decided to hire 25,000 veterans by 2025, GE & Apple wants to be carbon neutral, Netflix and Spotify offer 52 weeks of paid Parental leave, Wells Fargo donates up to 1.5% of their revenue for charitable causes.?The enhanced trust of customers in the brand rubs off on the product too. Wholefoods sells organic, all-natural, non-GMO, and other healthy foods (no-hormone & no-antibody meat, wild-caught fish, gluten-free food, veggies grown with no harmful pesticides, etc.). They are expensive but people visit whole foods to get their daily foods. Wholefoods sells differentiated products just because they sell organic? Or is it because they educate customers on healthy foods, have better decor, have a wide selection of household items, have better health-info labels on their products, friendly?customer service, or a buffet-style sit-down restaurant?

Many other grocery stores sell organic food. But people prefer to purchase from Wholefoods because of the trust they have that they will not accidentally buy GMO or other (un)healthy food. They trust that the food is either organic or all-natural. Walmart, Kroger, Aldi, Safeway, etc. grocery chain stores also sell organic foods but at the same time carry other products that do not show the same consistent message of making healthy food accessible to people and they (the customers) can shop with trust.??

Trust is difficult to gain and easy to lose. Companies hosting customer privacy data need to constantly keep the data secured. One incident of data leak may erode the trust but customers may not be aware of all the preventive steps enterprises take to secure the data. One wrong apple in a Wholefoods box may stop a customer from picking Apples from Wholefoods. One wrong flight ticket may force the traveler to post a scathing comment on social media about the airlines. In the current day social media world, it is even more difficult to prevent the leak incident from going viral.

How to build trust? Create a clear and simple message about what they stand for and stick to that stand under all circumstances. Let's take the example of Starbucks. Starbucks announces the following values:?

With our partners, our coffee and our customers at our core, we live these values:

1. Creating a culture of warmth and belonging, where everyone is welcome
2. Acting with courage, challenging the status quo and finding new ways to grow our company and each other
3. Being present, connecting with transparency, dignity and respect
4. Delivering our very best in all we do, holding ourselves accountable for results

Let’s check the historical evidence of the trust-building exercise of Starbucks trying to stick to its value.?

1)???Creating a culture of warmth and belonging, where everyone is welcome

a)???Personalized coffee cups with first names written; sometimes smileys too

b)???Secret menus

c)???Employees are partners, not baristas

2)???Acting with courage, challenging the status quo, and finding new ways to grow our company and each other

a)???“Coffee scientists”: Starbucks partners are trained to create newer coffee recipes virtually turning them into scientists.?

b)???Helping coffee farmers flourish by buying ethical beans

3)???Being present, connecting with transparency, dignity and respect

a)???LATTE training for employees

4)???Delivering our very best in all we do, holding ourselves accountable for results

a)???“Ideas.starbucks.com” and lets fans vote on ideas

In every step of the coffee supply chain and in the customer journey, Starbucks has stuck to its values.?

Are there any shortcuts to gaining trust? We guess not. It takes a long time to gain trust. Apple products before the return of Steve Jobs to Apple were not of great quality. Made in Japan became popular a few decades ago to signify the good quality of products manufactured. Intel Inside campaign was a trust-generating exercise Intel used to sell more computers.

Remarkability?

Remarkability is that attribute of a brand or company that compels consumers and non-consumers alike, to recollect the brand name with fondness. The smooth curvy edges of the iPhone, the quality of drive of a Tesla Model S, the coffee aroma in Starbucks, the road-hugging performance of a Mercedes car while exiting a highway at high speeds, the split-second response to a search on Google, on-time delivery of Amazon order, refreshing feel of a cold coke drink, are often fondly mentioned in conversations among friends.

In a paper Communication Channels and Word of Mouth by R Iyyengar and J Berger on how a message is influenced by the medium, they interviewed around 6500 people to ask what makes a product interesting. The more remarkable the product was, the more exciting it was for the fan. Remarkability increases if there is an element of surprise, interesting and unexpected features available in the product. For example, when you think of low-cost airlines, you expect no free food and drinks being served on the flight. But Southwest Airlines has been serving free drinks on domestic flights for quite some time.?Remarkability is also found when customers while describing the product exaggerate certain qualities of the products, “oh my god, the car runs so silently that I could not hear even when it drives by next to me”, “the body lotion is so smooth that my skin feels like baby’s skin”.?

In rare conditions, a popular leader of the organization may extend his/her credibility to the product. Elon Musk, Jeff Bezos, Bill Gates, Barack Obama, Ustad Zakir Hussain, The Pope, bring that extra remarkability to the product. But, in our opinion, such remarkability does not last long.

Simplicity?

Leonardo Da Vinci said, “Simplicity is the ultimate sophistication”. Simplicity means fewer choices, ease of use, less time to understand, fewer clicks to reach,?and more intuitive to understand. Mercedes S Class cars kick in the four-wheel drive automatically when the roads are slippery. Google maps auto signals the drivers about a faster route without the driver clicking a button. YouTube auto-suggests the next best video to watch without asking questions.?

Try giving fewer choices to customers. In a famous paper titled If Customers Ask for More Choice, Don’t Listen, the authors advocate for simplicity. Simplicity could be fewer choices and/or fewer features. If you are planning to make an impact on your customer and provide a variety of options, think again. It may not be a good idea.?Too many variations in product features confuse too. Apple phones exist in just a few varieties as compared to Nokia and Samsung phones. Tesla offers fewer varieties in a Model S compared to Honda Accord.??

The design guru for the German grooming product giant Braun, Dieter Rams, says simplicity is better than innovation. Simplicity could be added to the product by using icons or pictures on the control panel, voice, or video that auto-senses the intent of the customer and responds, standardizing across products or industry expectations (for example a vertical handlebar on a door is to pull the door to open and a horizontal handlebar is to push the door; no-touch car trunk opening serves a similar purpose), face-recognition to unlock a mobile phone, Amazon’s single-click checkout, big icons, less text, more pictures, fewer product variations, fewer page-clicks, quicker system response, makes it simple for fans.?

The opposite of simplicity is complexity. A complex process of apartment rental or car rental may signify how the corporation is protecting itself from a problem rather than focusing on the benefits of the consumer. In contrast, examine the simplicity of renting a Zip car. Purchasing a no-frills flight ticket is a complex process as it is not easy for the flyer to guess the final price of the ticket as you will be charged separately for seat allocation, luggage check-in, inflight food, priority in boarding, etc. One sector where simplicity is still a long way to go is medical benefits. Every year employees have a nightmarish experience to select their medical benefits, tempting them to default to last year’s options.

Simplicity helps. Check the report on World’s simplest brands and their impact on revenue.?

Word of mouth

The most-watched video on YouTube as of April 2021 is “Baby Shark Dance”. It was?watched more than 8.4 billion times. The next most-watched is a video music Despacito by Louis Fonsi. It had garnered 7.3 billion views by the same time.?How did they reach that number, especially the Baby Shark where we do not think it was actively marketed??

In a?recent statement, Zoom CEO mentioned that their NPS numbers are high. Hence they do not have to spend a lot on marketing as word of mouth is tremendously more effective. Word of a mouth is a powerful mechanism to create a buzz. Though companies can release creative ads to create the buzz, many times the product catches on the imagination and fascination of fans. Even fans who did not use the product end up having a positive opinion of the product. According to Nielsons, 92% of consumers worldwide trust word of mouth from friends and family. More research proves that referrals and word of mouth get more business.?

How to get the word-of-mouth advantage? Give a trustworthy opportunity for your customers to give feedback. Also, work on meaningful responses to the feedback to show that the company is privileged to receive the feedback. Creating the best product and offering exceptional customer service are the starting points of word-of-mouth. Next, user-generated content is a huge boost to Word of mouth. Giving an opportunity to the customers to give their unfiltered feedback on a public forum creates authenticity and trust. Offering to train and educate customers on products gives an opportunity for the enterprise to create online communities which can share.?

Hope is never a great strategy. Similarly, hoping for customers to spread messages using word of mouth is not the right strategy. Enterprises can do Mouth-triggers. Send alerts and emails for upcoming major events that are beneficial to customers. Sharing Referrals, friends & family discounts and coupons also helps.?

Word of mouth increases if at least one aspect of the product is exceptional. Disney offers exceptional visuals to create picture-taking opportunities. Amazon customer service is quick, empathetic and in a dispute, usually decides in favor of the customer (if you complain of a missing package, amazon re-sends the package without questions). Tesla’s remote software update for a car is such a unique feature and is talked about a lot.?

“Grab the opportunity”

Great brands sometimes make mistakes. Marketing, pricing, product features, and product mistakes are possible. The longer the life of the brand, the longer may be the list of the mistakes. It is not the number and intensity of the mistakes but how the brand grabbed the opportunity to right the wrong. “Grab the opportunity and do the right thing”. It matters less about what mistake you committed but more about how you responded when you were wrong.

Let's talk about one such example of a major mistake committed by a great brand and how it recovered. This is, additionally, an example of crisis management. We want to talk about Johnson & Johnson’s Tylenol poisoning.?In 1982, some Tylenol capsules in a Chicago Drugstore caused the death of a few people. Someone maliciously injected poison into these capsules. When the news broke out, J&J did a marvelous job of “grabbing the opportunity” and “doing the right thing”. J&J not only recalled the Chicago area batch of Tylenol, but it also recalled Tylenol in the entire country. It refunded people for their purchases. J&J used the media to alert the nation about the poisoning and urged them to avoid consuming it. It also set up a 1-800 toll-free number for people to call. It set up a similar toll-free number system to update the media. Later J&J released a triple-safety packing for Tylenol. This people-friendly response that goes beyond the legal expectations makes Tylenol a differentiated product. J&J quickly gained its lost market share and continues to be a world-class and iconic brand in Pharmaceuticals.?

Apple’s response to a FBI request to unlock a deceased criminal's iPhone is also a case in point. In March 2016, the FBI wanted Apple’s help in unlocking the iPhone of a terrorist in?San Bernardino, California.?The killer had killed 14 people and the judge wanted to look into the iPhone of the killer. Apple refused and stated that they respect the privacy of the individual data. Apple argued that making a back door entry to access iPhone data and to create a master key to decrypt the iPhone data is a violation of Civil liberties. Such back door access also gives a chance to the hackers to use the same back door jeopardizing the user data. As the entire nation was riveted to their TVs to watch the progress of this case, Apple stuck to its principles. This, we think, reinforced Apple's credibility.?

The years 2020 and 2021 have seen Covid induced miseries in the world. A lot of lives were lost unnecessarily. Many countries went through more than one wave of Covid infections and deaths. Businesses made losses and unemployment grew, which further created misery. A brand’s response to such trying times is crucial. KFC suspended their “finger-licking good” campaign. Geico stopped the “Perfect High-five” commercial. Both campaigns do not resonate with the hygiene and social distance guidelines of the medical world.?

Social credits?

Companies earn credits for their good deeds. In the modern socially connected world, information sharing is quick and seamless. A quick, timely, and intelligent social deed of a company earns social credits that add to the shine of the brand.?Does doing something out of the norm attract attention? We guess it does. There are examples of weird videos, weird products, and weird acts by people that attract attention but that may not sustain for long. But a different type of out-of-ordinary behavior may create something called Social credits. In March 2021, Tesla announced that their CEO will carry an additional title “Technoking of Tesla” and the CFO will carry an additional title “Master of Coin”. Just a new title or a new way of calling a product will itself not add to the quality and benefits of the product but it increases the social credits. Social credit could be defined as a goodwill credit balance in their social bank that the company or the product can use. This could be used to gain free marketing, or create a sense of mystique in the eyes of the current or future fans of the product. The follow-up discussion on such weird actions will further create that buzz in the consumers. The plethora of social media outlets available adds to the “quantity” of social credits. Richard Branson’s boisterous behavior adds to the charm of the Virgin brand. BMW’s tribute to retiring Mercedes Benz Chairman, Dieter Zetsche was an amazing display of competitive camaraderie going beyond traditional rivalry.?Zappos’ customer service agent would not mind ordering a pizza for you even though they are into online shoe sales. Warby Parker donates one pair to needy poorer people for every pair bought.?

Note: Do not confuse the term social credits, suggested here, with the one implemented by the Chinese Government for corporations and individuals.?

Authenticity

An emotional connection of a customer with the product happens due to its authenticity. Authenticity comes from transparency about the product and the company. Many differentiated products and also iconic brands go the extra mile to provide transparency. In-N-Out burgers are famous for their fan following and taste. But what is exciting for the fans is that they can watch how their burger is made and how their french fries are cooked. The process of picking the right potatoes, cutting them into thin long potato strips, pouring the cooking oil from the original bottle, frying them, and serving them hot satisfies their palette and heart too.?

Patagonia’s transparency project is called “Footprint Chronicles” and it is displayed to the general public through videos on the company’s website. When a customer clicks on an item on the Patagonia website, that customer can view videos that show each step of the supply chain, including all textile mills and sewing factories used in creating the item. Customers can check the Footprint Chronicles page to view the company’s general supply chain. If a part of the manufacturing process needs to be improved, Patagonia admits it directly in the video and invites feedback from customers on how to improve.

Conclusion

If a brand wants to create a differentiated product, they need to satisfy the expectations of both the hygiene and defining factors. Care has been taken to describe the above factors from the perspective of “how” rather than “what”. When Satya Nadella, Microsoft CEO was asked “how did you do it” in the context of Microsoft reaching a $2T valuation, he said, “we start with the mission and end with culture, and in between we focus on the strategy…”. This effectively summarizes my proposal in this paper. Differentiated products start with hygiene factors and end with defining factors to reach and stay at a differentiated state.?

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Credits: This research would not have been possible without the generous, enthusiastic, and quick help from Arathi Nayak.