One of my favorite movies is Risky Business, the 1983 classic featuring a young Tom Cruise playing high school kid Joel Goodson. Joel is an average kid from an upper middle class Chicago suburb who has the good fortune of having his parents take off for a few days, leaving him with an empty house and a good amount of money. Despite the fact that it has been 30 years since the movie was released, it holds up pretty well. High school kids today would love to have their parents disappear for a few days, so as to have some unsupervised fun. Like any good teen left alone, Joel is involved in mischief throughout the film. In one scene, Joel is driving his father’s Porsche 928 (against his father’s command), trying to evade Guido the Killer Pimp. He is successful in this endeavor, and after the car chase, he joyfully exclaims “Porsche: There is no substitute.” His remark served as a testament to his perception of the Porsche brand experience, represented through a belief in the car’s high performance and quality engineering.
Any brand likes to have people feel as passionately about their product offerings as Joel Goodson feels about Porsche. I think that getting passionate fans comes down to having an exceptional price-value proposition and a meaningful point of differentiation from similarly branded products.
The price-value proposition can be expressed by a brand in numerous ways. One way that the price-value proposition is expressed is simply through low pricing. As a brand strategy, this often leads to commoditization as a target market only respects your brand for its lowest price point. Nevertheless, a number of brands have been successful using price as the primary component of defining their product. In retail, Walmart is strongly associated with low prices, and they implement many tactics (including incredible supply chain management) to emphasize that component of the brand. In beer, one brand that has used a low price strategy has been Natural Light. Natural Light achieved impressive sales growth during the height of the recession. Sales grew by 9.1% in 2009 and it became the 5th most popular beer in the United States. There is always going to be a market for Natural Light, so long as its pricing stays low.
The price-value proposition is often favorably received by a segment of the market with a premium price, premium experience value proposition. Going back to the beer category, the exact opposite strategy of Natural Light’s strategy is the price-value strategy used by numerous craft beer brands. These brands typically charge a premium price in their product category, although beer as a whole is far less expensive than a car or television. Craft beer brands grew sales by double digit percentages by both volume and dollars in 2011 and 2012 in the US, despite the fact that US beer sales were only up 0.9% by volume in 2012.
Differentiation is something that is a part of every product offering, but not every segment of the market realizes differentiation. Even if they do realize differentiation, substitution exists. Differentiation takes on many forms, and some forms are more successful than others. Differentiation can be visual (Nike’s Swoosh logo and McDonald’s Golden Arches logo are good visual differentiators). Differentiation can be achieved through packaging (think Coors Light’s Cold & Super Cold notifications on cans & bottles and Simply’s clear orange juice carafes). Differentiation can be achieved via association, and association can take on many forms. There’s differentiation through celebrity endorsement, iconic pitchman (the Marlboro Man is a classic example), and supplier association. Celebrity endorsement is a tough road for a brand to choose as a key differentiator because if there’s a celebrity behavior scandal, the brand can suffer significant brand equity damage. Supplier association differentiation is another form of differentiation that should not be a sole brand differentiator. A great example of this form of differentiation is Spalding’s relationship with the National Basketball Association (NBA). Spalding has the brand supplying the NBA with basketballs since 1983. This fact likely helps Spalding sell more basketballs, but if the NBA were to change suppliers of game balls, it would likely impact the Spalding brand. Therefore, I believe that the best forms of differentiation come from product features essential to the brand and not from other elements of the marketing mix.
Here are 3 good examples of essential product features serving as differentiation in 3 product categories:
Fast Food: In-N-Out Burger’s freshness serves as a differentiation point. The company attempts to keep all of its restaurants within a single day’s drive (approximately 500 miles) from its distribution hubs. In-N-Out was founded in Southern California, and then expanded to locations in Las Vegas, Northern California, and Arizona after that. In 2011, In-N-Out opened locations in Texas, outside the 500 mile radius of the original distribution hub. To keep their freshness brand promise via short distance distribution, the company opened a 2nd distribution hub in Dallas. Wherever In-N-Out goes, there is a sizable segment of the market that can be classified as brand devotees. I believe some of it has to do with the fact that many who once lived in California have relocated to places like Arizona and Texas.
Airlines: Southwest Airlines has been traditionally differentiated from the major legacy carriers. Southwest Airlines has planned its flights around a point-to-point flying model instead of the more traditional hub and spoke model. Southwest Airlines has also never assigned seats, originally issuing boarding passes at the gate with a number (getting 1-30 was a major achievement) then modifying that with a more tiered boarding system.
Cars: Subaru Symmetrical All Wheel Drive system is a unique feature appreciated by drivers who want the benefits of safe handling in wintry weather conditions without having to own a truck or SUV. In the US, Subaru is the most popular in northern states with severe winters, but Subaru has made efforts in recent years to expand its footprint beyond the cold states. Subaru vehicles typically have better gas mileage than trucks or SUVs and the Impreza WRX model is a sports car. In fact, Subaru has been gaining popularity . For the fifth consecutive year, Subaru of America set a sales record.
Can you think of some other examples of brands that pass the “There Is No Substitute” test based on their usage of the price-value proposition or product differentiation factors? If so, share your feedback below.