Functions and Frameworks is dedicated to helping business owners innovate

Saturday, July 27, 2013

Product Differentiation as a Function of Enhancing Brand Equity

During my recent trip at Kuala Lumpur, Malaysia - I stumbled upon this cozy bistro called The Loaf. The lifestyle cafe is situated near the entrance of the high-end mall Pavilion and the first impression I've had seeing it was - "the bread must be expensive."

Judging from the shop exterior to the big burly baker logo, it seems like your ordinary French bakery shop where most of the bread and pastries have French names that you can use for a tongue twisting challenge. But as I pass by the bread and pastry section, I noticed names like Nama Roll, Black Sesame Cookies, Confiture Hiroko, Uhuhu - and it dawned on me, this isn't French, this store is Japanese! 

My curiosity started building up as I go through the menu. I discovered that aside from bread and pastries, the bakery also offers full meals and signature coffee selections. What comes as a big surprise is the price point of their products. It surely does not cater to the low-price driven consumers but it definitely targets a much broader middle income market. My initial assumption of the price being expensive was shattered and made me come up with another hypothesis: 

if the price is elastic enough to attract the middle market, then one reason for the influx of customers must be the quality of products they have. 

The Core Concept of Being Different

As I munch their yummy creamy Ampan, I started observing how the entire store operates, what customers are buying and how conversations take place between customers and storefront representatives (yes, I don't call them waiters or staff). 

Observation #1 - Locals Directly Orders What They Want While Tourists Ask for Product Information

It's a no brainer to know that foreigners  tend to ask more questions about the products being sold because some have food restrictions. Frequently asked questions are "what's in it?", "what is good to eat here?" and "what's your best selling product?". No surprise there. 

What did surprise me though is that people who asks for information would go for the most bizarre products. I would have guessed that people will tend to go for the familiar products like the baguettes or croissants but most of these people went for the Japanese named products. 


I realised that people who validates food composition from bizarre products has higher purchase probability. The instinct to ask what's in a product gives every product owner the avenue for pushing mouth-watering information. This is an opportunity to describe the end-result of complete satisfaction upon consuming the product. Hence, setting each product apart from each other and from competitors. 

Observation #2 - Customer Persuasion Starts When Customer Discovers Whats Different in a Product

Generally, food products are bought based on how attractive they look. That's the very reason why all food ads are very photogenic - its main purpose is to trigger that salivating sensation upon seeing the food. 

But observing the more curios customers - people who seeks more product information - tend to respond differently when it comes to their product of choice. When customers like me found out that The Loaf uses a Japanese methodology in creating their products and only using Japanese ingredients, that made it easier for me to buy their food. This led me to my second light bulb moment. 


I realised that more than the attractivenes of the look, people who are open to trying new products are driven by its uniqueness. Unique can mean anything - it can be the manufacturing process or it can be the components of a product that forms it features and benefits. 

Overall, the core concept of product differentiation just simply means developing a position in the mind of the consumers deemed unique. These are functional aspects of a product that is seen by the consumers as valuable hence creating a sense of perceived differentiation. Most marketing textbooks refer to this as unique selling proposition. 

Store Navigation as a Form of Product Differentiation

It may seem little to the eyes of every business owner but store navigation is a crucial element in differentiating from competitors. The easier it is for customers to discover things in your store, the better it is for your customer conversion. Most retailers would agree with me when I say that the number one reason why customers do not buy in a store is because they couldn't find the items they want. 

Navigation is key. And while most marketing folks would put navigation in the "place" or "promotion" strategy, it is actually a key element in the "product" category. Navigation should be engineered in the entire product concept specially for companies that are in the food service industry. For the Loaf, more than the food that they sell, it is actually the entire bistro that constitutes the entire product.

The moment customers walk in, to how they are greeted, to the way they browse through the menu - everything that a customer experience is actually the entire product. I've often talk a lot about experience and how it is key in driving loyalty to every business - it is but the same concept in differentiation. More than the product that can easily be copied by competition, what remains true to a specific brand is the totality of a customer's experience. 

Experience - can never be fabricated nor duplicated. Each is unique to each customer. Although we can not control how a customer perceives the entire experience - there are still controllable elements in your entire product that you can tweak to your favour. Humans are complex beings with simple needs - that's why big corporations like Apple, or Disney or Google always talks about user experience. They know the value it brings to the longevity of a brand or a business.

For the Loaf - navigation is done through the careful placement of products and the clear separation of take-away orders versus people who would like to dine in. Based on my experience, I think what needs more pushing is on the discovery of new products. For the sake of discussion, I noticed 5 touch points in-store that can be helpful in increasing new product awareness and trial purchase. 

  1. In-store print ads/poster - the fastest way to attract a passerby is a nicely informative poster of the latest product. 
  2. Menu Insert- no brainer here, a new insert in the menu would help it stand out from the current offerings most of the loyal customers are familiar with. 
  3. Sales promotions - everyone loves a good sale specially for mark down items. You need to stimulate trial purchase through a good promotion.
  4. Store representative - yes, a simple "would you like to try our new product… it is made of this sweet tangerine flavour that is to die for" can do wonders on the additional products ordered by each customer.  Sometimes, all a customer needs is a gentle reminder to try something new every now and then. 
  5. Cashier - the point of sale, the cash registry is the most crucial touchpoint. It is where the customer decides if he/she will use his/her extra money to buy more or save it for other purchase. But of course, every business wants a bigger share in the dispensable income of every consumer. Hence, this touch point should be optimised from the cash register to the pop up displays to the cashier who I believe should be trained to cross and up sell every item on the store. 
Unique Products Drive Customer Engagement

Have you ever heard of the negative 60 degrees coffee? If not, let me tell you my first experience of having one. I just heard of this from a friend who always order it at the Loaf. These are coffee beans (i think) that is roasted to perfection then with a special freezing tool, turned into ice cubes up to negative 60 degrees. The way you take it is that they will serve it in a glass then hot milk will be poured over it. 

As it melts longer, the taste becomes stronger (sounds like a slogan :P). What fascinates me more than the taste and quality of this drink is the way it was served. I've never had anything like it because I don't have it back here in the Philippines. 

Which leads me to my last point that the ultimate litmus test for you to know that you have a great product is that you get to drive conversations among your customers. 

When I was having it, I didn't realised that one tourist is also transfixed in the way the coffee was made. From the pouring to the stirring to the way I quickly drank the entire thing. Before he left, he approached me and asked what I was having and he thinks it looks good. If it was a bad experience and a bad quality product - I would have said "don't waste your money. Not that good". But to my surprise, the first thing that came out of my mouth was the product feature. Can you guess what it is? 

I said "it's the negative 60 degrees coffee. They put hot milk over frozen coffee ice cubes." this candid statement I made actually is the unique selling proposition. And judging from the look of the face of my fellow tourist - I bet he will have a taste of it before leaving Malaysia. 

This is what I meant about driving customer engagement. If you have a unique product - people will talk about it. And more often than not, people would talk about "the experience" rather than the product name. And in return, this helps fortifies the brand equity. 

Last Thoughts…

To sum it all up - every business needs to differentiate themselves from competitors. The more the company differentiates, the farther it is in the game and the longer it stays in the market. Being innovative is the trait that each big corporations should have in order to survive in this highly saturated market. 

And the way to do this is to create a product that does not only stop in itself but is amplified through the value added services every customer receives when discovering these items to purchasing it up to after sales service. 

The more unique a product is and the more it resonates to a particular consumer, the higher the chances of brand longevity.