If you are a follower of the general marketing discourse on LinkedIn, Twitter, or in the marketing media, you’ll notice ongoing debates around supposedly opposing concepts – long-term versus short-term, traditional versus digital media, mass marketing versus targeting, etcetera. Each concept comes with its own dedicated following and active promoters swearing their view of the world is the correct one. A big, seemingly conflicting, topic that has sparked debate in recent years is the issue of salience versus differentiation.
At its core this is a discussion on the best route to brand growth. One side of the argument claims that improving salience, i.e., having a brand that people come to think of in many buying situations, is the only route. This implies that brands should only focus on making sure they are mentally and physically available to consumers in the right buying situations, and that building a differentiated brand position is a waste of time and resources. Team Differentiation, on the other hand, argues that brands need to find a meaningfully different position compared to their competitors or they will lose their relevance in the marketplace. The pendulum has been swinging back and forth on this topic over the years. Not long ago, most brands were focusing all their efforts into creating a differentiated position. However, salience has made a comeback thanks to the highly influential work of Byron Sharp and the Ehrenberg-Bass Institute.
As entertaining as these polarised marketing debates can be, the truth is often that it’s not either/or. We need to consider both the long and the short term, traditional and digital media combined to reach the broadest audiences, etcetera. And the same goes for salience and differentiation. Both are crucial aspects of long-term brand building, but they play different roles in how they contribute to a brand’s growth.
How do Salience and Differentiation add to your brand growth?
Sharp and his colleagues have shown that salience is a key factor for growing volume and revenue via increased penetration and the activation of non-frequent buyers. But solely focusing on salience means ignoring another important benefit of having a strong brand, which is creating pricing power – i.e., that consumers are willing to pay more for your brand compared to competitors. This is where differentiation comes in. Brands that are very salient but lack differentiation against competitors are perceived as generic and can rarely justify charging a higher price for their products or services. On the other hand, a brand that is differentiated from competitors in a way that is meaningful and value adding for consumers can not only charge a price premium, but maintain it over time.
Well known examples of this strategy are Apple and Tesla. Both those companies have been successful in building a unique position as a niche brand, then grow their salience without compromising on their differentiation. This has allowed them to dramatically grow their market share over the years while keeping their price premiums intact. Then there are other brands, like Virgin and IKEA, that have built a unique brand position and then used the higher perceived value from consumers to keep a sustainable growth and expand their brands into other areas.
So, both Team Salience and Team Differentiation are right – salience grows volume and revenue, whilst differentiation builds and maintains pricing power, over time.
To ensure that investments are allocated in the right direction, brands need measurements and KPIs that capture both perspectives. Most brands measure salience in some way, either through brand funnel KPIs in a Brand Tracker or through other measurements such as share of search. A Brand Tracker usually also covers brand associations or attributes. This is an important way to keep track of consumer perceptions and the current competitive landscape. But brand associations should not serve as long-term KPIs of differentiation.
Achieving a differentiated position is a moving target – consumer needs and behaviours change, and a brand’s position needs to be adjusted to maintain differentiation over time. What sets your brand apart from competitors today may be category standard in just a couple of years. Thereby, the brand associations you choose as your main KPIs for differentiation will need to be changed and updated frequently, making them difficult to use as guidance for long-term strategy adjustments. Instead, brands should consider the end-goal of having a differentiated position and use pricing power as a KPI for differentiation.
At Nepa, we have developed a Willingness to Pay (WTP) solution that captures a brand’s pricing power. The solution uses Discrete Choice Modelling (conjoint) to simulate actual choice trade-offs and is a valid method to accurately measure and predict consumers’ willingness to pay for the different competitors in a market. It shows the incremental value that is created by a strong and differentiated brand in a simple, transparent KPI that can not only be quantified in monetary value, but also connected to market share development. Nepa’s Willingness to Pay can be added to our continuous Brand Tracking set-ups, providing brands with the KPIs they need to grow through both salience and differentiation.