How to Build a Product Differentiation Strategy that Drives Growth

Lately, at JPG, we’ve witnessed a rise in clients seeking support in differentiating their products. While product differentiation has always held significance, what is fueling this recent surge in attention towards it?

One significant driving force is the notable growth of the private label sector. According to FMI (Food Marketing Institute), private label products surpassed an 18% dollar share in 2022 and are projected to reach over 22% within the next two years.

While inflation played a major role in this growth, private label brands have been actively strengthening their competitiveness through innovation and delivering good value to consumers. A recent study conducted by Attest revealed that even after inflation subsides, 73% of US consumers plan to continue to purchase private label brands because of its perceived value. This also indicates that "satisficing" is on the rise. Private label brands may not have all the unique features and extras, but as long as they fulfill the basic requirements, they are in demand. This is particularly true when consumers fail to perceive significant value in the additional features that other brands may provide.

As consumers have become increasingly comfortable with buying private label products, food and beverage brands must explore avenues of differentiation through innovation to remain competitive in the market. At JPG, we have developed a process that evaluates brand, product, technology, and model to create a roadmap for a successful product differentiation strategy. The following four steps provide an overview of the inputs that guide our process.

Evaluate the competition

While most brands are familiar with their direct competitors and may have conducted some market research to assess their strengths and weaknesses, product differentiation necessitates a broader perspective that goes beyond the brand itself. This is where category analysis comes into play.

Category analysis involves evaluation and understanding of a specific category of products within the market. Although we won't delve into a detailed category analysis strategy here (which can be explored further at another time), the primary objective is to identify opportunities by gaining a complete understanding of the existing claims landscape and how products are positioned. This process allows brands to grasp the competitive environment in which they operate by revealing underutilized or overrepresented claims within the current market.

By conducting a thorough category analysis, brands can gain a deeper understanding of the competitive landscape, identify gaps and untapped potential, and make informed decisions regarding product differentiation. This analysis serves as a valuable tool for uncovering opportunities and gaining a competitive edge within the market.

Find the whitespace

Identifying whitespace is a valuable approach for brands to uncover untapped opportunities and potential areas for market growth. From a product design standpoint, it involves analyzing the gaps where customer needs are not being met to unveil underserved segments. Or,  where they are being met but impose significant tradeoffs on other desired benefits. For instance, a product might meet the consumer's need for a gluten-free option but fail to satisfy their low sugar preferences.

Sometimes, finding whitespace can be achieved through uncovering new ways to communicate the benefits of your product. By analyzing the whitespace surrounding product descriptions and messaging, or by studying how the product is being used for unexpected outcomes by a subset of consumers, brands can discover novel ways to convey information about their products.  

By exploring whitespace, brands can uncover unmet customer needs and differentiate themselves through effective communication strategies, ultimately unlocking incremental growth and capturing new market opportunities.

Look beyond the functional aspects of your product

In the present-day landscape, meeting functional attributes is considered the basic requirement for any product. In other words, functional is table stakes. It is important to note that when we mention "functional," we are not referring to the health, wellness benefits, nutritional content, or enhancements. Rather, we are referring to the core purpose or primary function of the product.

Brands must strive to understand and fulfill the minimum essential functional requirements within their respective categories. Whether a product contains 20g or 25g of protein is insignificant as long as it meets consumer expectations. Going beyond the minimum functional requirements doesn't always provide added value for the consumer – instead, it often adds unnecessary costs to the manufacturing process.

Know your audience and the progress they’re trying to achieve

This step in product differentiation strategy is undoubtedly the most challenging yet rewarding. It involves delving into the depths of consumers' emotional and social needs, as well as the tradeoffs they are willing to make to progress.  

To meet consumers' emotional needs effectively, brands must gain insight into the positive experiences consumers desire from products. This requires analyzing the context of their situation, identifying their pain points or areas for improvement, understanding the driving factors behind their purchasing decisions and the desired outcomes they seek. This overview merely scratches the surface of the extensive investigation required to comprehend consumers’ emotional needs.

Equally significant are the social implications associated with a product. While not always apparent, the social aspect plays a crucial role. By recognizing and incorporating consumers' social needs, a product can transcend its conventional functional requirements and generate social outcomes. This could involve reducing social discomforts or enhancing positive social outcomes, amplifying the product's overall value.

Let's break down the idea of meeting the emotional and social needs of consumers using a relatable example: Uber's disruptive influence on the world of local transportation. Uber cleverly identified a way to improve the emotional experience of passengers who were left uncertain, waiting for a taxi in various weather conditions. By developing an app that allows users to conveniently book rides, they could wait comfortably indoors, knowing precisely when their ride would arrive. This innovation created a positive emotional outcome, alleviating the stress of uncertainty and bad hair on a rainy day. Furthermore, Uber also addressed the social aspect by providing users with an estimated arrival time at their destination. This newfound knowledge enables consumers to arrive on time for appointments, parties, dinners, and more, or simply inform their hosts of any delays. As a result, Uber successfully reduces the social discomfort associated with being late and the frustration of not being able to predict arrival times.

In summary, unraveling consumers' emotional and social needs is a complex yet pivotal task in product differentiation strategy. It requires a thorough understanding of their desired experiences, as well as the social factors that influence their decision-making process, leading to the development of products that truly resonate with consumers on both emotional and social levels.

How do you take your product differentiation strategy and make it actionable?

To transform your product differentiation strategy into actionable steps, there are key approaches to consider. First, weave claims and whitespace with consumer needs and conduct consumer testing to align your product with opportunities and validate its appeal. Second, leverage the insights gained from social and emotional analysis to guide your external communication, crafting messaging that resonates with consumers and addresses their social and emotional needs. Lastly, utilize a comprehensive approach to map out your brand, product, technology, and business model. Partnering with experts like JPG can provide you with a strategic framework to evaluate and optimize these elements. Assess your brand identity, product features, technological advancements, and overall business model to ensure they align with your product differentiation strategy. This process will help you develop a clear roadmap that directs your actions and maximizes the impact of your differentiation efforts.

By integrating these approaches, you can bridge the gap between market opportunities and consumer needs, effectively communicate your unique value proposition, and strategically align your brand and product to stand out in the market.