Reading 16 recommended articles on brand differentiation did not change my mind, and I doubt they would change yours either

Jenni Romaniuk, Ehrenberg-Bass Institute for Marketing Science

I have been an academic in the field of branding for a couple of decades now. I read the requisite academic literature in my youth and formed an opinion that there was little evidence that brand differentiation was critical to brand growth. I even did my own testing which also found the evidence lacking and published two papers (below).

Romaniuk, J., B. Sharp and A. Ehrenberg (2007). "Evidence concerning the importance of perceived brand differentiation." Australasian Marketing Journal 15(2): 42-54.

Romaniuk, J. and E. Gaillard (2007). "The relationship between unique brand associations, brand usage and brand performance: Analysis across eight categories." Journal of Marketing Management 23(3): 267-284.

That being settled in my mind, I proceeded to research what else might be related to brand growth, and with my colleagues developed the ideas of Mental Availability, Distinctive Assets and so on. So when I saw this from Associate Professor Felipe Thomaz, in Contagious magazine, I wondered, had I missed something important in my past reading? Or maybe there was some new evidence that would change my initial assessment.  

Q: So the consensus among the academic marketing community is that differentiation is vital to growth?

A: Yeah, the rest of academia has published saying that differentiation is how you actually grow. The consequence of the opposite is the slow decay and destruction of the brand over time because if you work through the logic, what you get is commoditisation. That's what the evidence has shown over 100 years. Growth is a function of perceived differentiation. 

So I asked Dr Thomaz to share the papers that lead him to this conclusion. Well I actually asked for the three best papers, and he gave me a list of 18, perhaps to make a point. So with the help of some trusty research assistants, we found 16 of the 18 papers and I carefully reviewed them looking for this empirical evidence linking brand differentiation with brand growth. This is what I found:

-Six papers were conceptual/model development papers with no empirical testing. 

-Four papers included perceived differentiation as a manipulated element or a co-variate. For example Sujan and Bettman (1989) look into whether you can use schema theory to work out if a brand is just differentiated or in its own sub-category (sub-type). In another paper Chakravarti and Janiszewski (2004) address whether category level advertising reduces brand differentiation. They manipulated advertising to either show a ‘differentiating’ attribute where brands vary a lot (e.g., taste) or a common attribute where brands don’t vary (e.g., nutrition) in four food categories. None of the papers relate to the question of the role of brand differentiation and brand growth.

-Two papers used own-price elasticity as a proxy measure of brand differentiation. This is an outcome and gives no insight into how to build differentiation.

-A further two papers used managers assessments of how differentiated their own brand was as the measure of differentiation. I am sure I don’t need to explain the problems with this….

-One paper (Van der Lans, Pieters and Wedel, 2008) was about visual distinctiveness. Yes they used the word differentiation but it was about the brand’s ability to standout on shelf as measured by eye tracking. This is distinctiveness not differentiation. 

Finally there was one paper that intrigued me, Mizik and Jacobson (2008) which modelled Brand Asset Valuator (BAV) data for ‘Differentiation’ against stock market returns. I am curious why the perceived differentiation measure they use is an average of the percentage response for Unique and Distinctive, particularly as the attribute of ‘Different’ is in the data set. First the primary analysis showed no relationship between Differentiation and stock returns, but this findings was obviously not acceptable so they did more digging and found a lagging effect between differentiation and unanticipated ROA. The authors claim:

We find that the firms that had an increase in differentiation during the previous wave had stock return .119 higher than firms that had a decrease in differentiation during the previous wave. Pg 28.

They claim this means if you invest in a brand that rises in Differentiation now, you will reap the returns in the future. So I assume that these researchers, and everyone involved with the BAV, is now fabulously rich and retired on an island somewhere? 

But I did learn some things…. 

There is general consensus that differentiation involves being either superior or unique, although there is disagreement if both or just one is needed. These papers did highlight to me a common assumption which is there are only two types of brands: The differentiated where the point of difference was the basis for brand choice or the commodity where price is the only basis for brand choice.

This thinking neglects the role of memory, and the incompleteness of our retrieval of brand information. It fails to consider that buyers want to buy as quickly as possible and use their brain and the environment to short cut their way through the process. This means that a brand’s value to a category buyer can arise from being easily thought of and easily found, or Mental and Physical Availability. 

This ‘differentiate or decay/destruct/die’ mindset also ignores the variability of the cues that buyers use to enter a category, and that differentiating too heavily on one quality can leave the brand at a disadvantage when category buyers find other qualities relevant instead.

Curiously, several papers acknowledged that many marketing actions reduce differentiation. Launching brand extensions, a small brand advertising an attribute previously advertised by a big brand, and new entrants into a market were highlighted as activities that serve to reduce actual or perceived differences between brands. But these were seen as bugs rather than features inherent to competitive markets. That these actions don’t differentiate a brand either or do so for long doesn’t mean innovation is irrelevant, it's part of what evolves a category. It’s just many of the gains of innovation are intermittent and short lived. I remember the contribution Uber made to be able to order a car and not worry about if you had enough cash on your or get charged an extra 10% for the privilege of using a credit card. But taxis have now copied this innovation, which means the whole category has moved forward but at a level with better payment options.  

Therefore I remain unconvinced by the evidence provided to me on brand differentiation, and don’t really understand why the idea of differentiation is so entrenched in marketing thinking. This is not meant to be a direct rebuke of Dr Thomaz, his thinking is common in academia and I appreciate him taking the time to provide the list of papers. Instead I’d like to challenge everyone to question this assumption of the importance of differentiation that has permeated marketing thought and actions for so long now, most likely to its detriment as it has stifled the testing of other ideas or the consideration of alternative explanations.  

As a final note, I will continue to review any further evidence so if you have any other empirical research evidence then please send it my way (actual research please, no case studies!). If you don’t then perhaps its time you also reconsider how important differentiation is to your brand strategy..…  

For those interested in reading more questioning the value of differentiation

Sharp, B. and J. G. Dawes (2001). "What is Differentiation and How Does it Work?" Journal of Marketing Management 17: 739-759.

Sharp, B. and J. Romaniuk (2010). Differentiation versus Distinctiveness. How Brands Grow. Melbourne, Oxford University Press: 112-133.

The list of papers with evidence on brand differentiation and growth provided for review

Balachander, S. and A. Stock (2009). "Limited edition products: When and when not to offer them." Marketing Science 28(2): 336-355.

Boulding, W., E. Lee and R. Staelin (1994). "Mastering the Mix: Do Advertising, Promotion, and Sales Force Activities Lead to Differentiation?" Journal of Marketing Research 31(May): 159-172.

Carpenter, G. S. and K. Nakamoto (1990). "Competitive strategies for late entry into a market with a dominant brand." Management Science 36(10): 1268-1278.

Chakravarti, A. and C. Janiszewski (2004). "The Influence of Generic Advertising on Brand Preferences." Journal of Consumer Research 30(March).

Chaudhuri, A. and M. B. Holbrook (2001). "The chain of effects from brand trust and brand affect to brand performance: the role of brand loyalty." Journal of Marketing 65(2): 81-93.

Dahlquist, S. H. and D. A. Griffith (2014). "Multidyadic industrial channels: Understanding component supplier profits and original equipment manufacturer behavior." Journal of Marketing 78(4): 59-79.

Horsky, D. and P. Nelson (1992). "New brand positioning and pricing in an oligopolistic market." Marketing Science 11(2): 133-153.

Keller, K. L. and D. R. Lehmann (2006). "Brands and branding: Research findings and future priorities." Marketing Science 25(6): 740-759.

Mizik, N. and R. Jacobson (2008). "The financial value impact of perceptual brand attributes." Journal of Marketing Research 45(1): 15-32.

Roehm, M. L. and A. M. Tybout (2006). "When will a brand scandal spill over, and how should competitors respond?" Journal of Marketing Research 43(3): 366-373.

Smith, W. R. (1956). "Product Differentiation and Market Segmentation as Alternative Marketing Strategies." Journal of Marketing 21(1): 3-8.

Smith, D. C. and C. W. Park (1992). "The Effects of Brand Extensions on Market Share and Advertising Efficiency." Journal of Marketing Research 29(3): 296-313.

Sujan, M. and J. R. Bettman (1989). "The Effects of Brand Positioning Strategies on Consumers' Brand and Category Perceptions: Some Insights From Schema Research." Journal of Marketing Research 26(4): 454-467.

Van Der Lans, R., R. Pieters and M. Wedel (2008). "Competitive brand salience." Marketing Science 27(5): 922-931.

van Heerde, H., C. F. Mela and P. Manchanda (2004). "The dynamic effect of innovation on market structure." Journal of Marketing Research XLI(May): 166-183.