Based on our experience working with some of the biggest and most innovative companies in the world, here are some takeaways for brand owners on how to align a brand’s innovation agenda around its meaningful difference and across the entire brand experience.
1. Innovation is the rocket fuel for differentiation.
Just as a rocket needs enough fuel to achieve orbit, a brand requires innovation to help it be perceived as meaningfully different and grow at breakthrough rates.
Brands perceived to be meaningfully different and innovative grew at double the rate of those that are meaningfully different alone.
To grow faster, brands must innovate to build and sustain their meaningful difference. Perceived differentiation is important because it helps people justify paying the price asked.
2. Innovation must help build ‘excess’ differentiation
Most breakthrough brands have excess perceived difference, more than can be explained by brand size alone, indicating that the brand’s difference is perceived beyond its existing user base. Analysis by the Said School of Business at Oxford University finds that perceived differentiation is the most important predictor of abnormal market returns (the returns that cannot be explained by standard financial models). This means that not only does difference set a brand apart from competition, it also positions the brand for growth.
In other words, perceived differentiation supercharges profitability.
Innovation driven difference can therefore be used to set a brand apart from the competition and drive breakthrough growth, particularly when a brand has excess differentiation that makes it stand out. However, we have all come across new product launches from well-known brands that just don’t make sense, leaving customers non-plussed, unimpressed or at worst disappointed. The failure of new products like these highlights that difference alone is not enough for success.
3. Meaningful difference, the remedy to disconnected difference
Successful innovation starts with what the brand stands for, what people already know and expect of it, but it truly shines when it is done meaningfully, meeting the needs of a brand’s target audience effectively. Using BrandZ data (chart below) we see this come to life in front of our eyes.
While meaning and salience drive volume sales, it’s how meaningful and different a brand can be that will drive pricing power. Making you worth paying more for because you meet the needs of your target audience in a unique way that only your brand can.
This therefore shows that while difference can enable you to break through, doing it meaningfully will enable you to be chosen at the right price, driving greater margin returns. Innovation therefore plays a vital role in connecting the two, enabling brands to evolve with the times whilst remaining familiar and true to their origins.
4. Innovate across the whole brand experience
Before we go further, it is important to recognize that innovation is not just about functional product benefits, it applies to any aspect of the brand that has the potential to differentiate and add meaning. Selman Careaga, president of the global Coca-Cola category puts it this way,
“I think when talking about innovation sometimes people tend to use the word as in product and packaging and formula. I think the way we see it is how we can create a different set of experiences of how people interact with Coke. For us #1 is really start with people first and how they experience coke.”
Innovation must help add value to a brand for its customers and consumers, and so add value to the brand by helping people choose it over alternatives and making them willing to pay the price asked. Coca-Cola’s dedication to innovation in all its different forms made the brand one of the most innovative brands in Kantar’s Outstanding Innovation Awards 2023.
5. Innovating for difference starts with the brand
Brands like McDonald’s and Baileys understand the need to find a compelling positioning and stay true to it in innovation and advertising. By doing so, they refresh and extend the brand’s offering.
Over the years, McDonald’s has innovated across its entire business whilst keeping its ‘good food fast at a good price’ positioning front and centre. Whether it is meeting an evolving trend with plant-based burgers, a new occasion with McCafe, a new route to market with McDelivery, or leveraging the power of digital and AI for faster service, the brand has stayed true to its promise of providing food fast and at a good price, building a self-reinforcing cycle of expectations and experience. As a result, McDonald’s has remained one of the most valuable brands in BrandZ, holding its own against the tech giants like Amazon, Google, and Apple.
Similarly, Baileys has developed a portfolio of products all based around the pursuit of pleasure, using the NeedScope framework to help define their unique positioning and provide guardrails for effective innovation. Baileys is now the world’s best-selling liquor brand and new variants Apple Pie, Deliciously Light, and Colada are reported to state driven a 31 percent net sales volume increase between July 2020 and June 2021 so demonstrates how important it is to start with the brand.
6. Consumer insight unlocks the power of differentiation
Remember, it is “excess” difference that is a leading indicator of growth potential. Brands must innovate in ways that build value not just for existing users but also extend their relevance and appeal to new buyers, while still aligning with what the brand stands for. So, the challenge is to identify something new in customer needs that will enable a brand to expand its ability to differentiate with meaning. This is where consumer insight can be hugely valuable. Knowing what consumers think of your brand – current users and potential new ones – allows you to understand the who, what, why, and where of your innovation.
To empower successful innovation, an insight must offer a new understanding of how the brand experience might add value to people’s lives in a way that is different and likely to be meaningful. However, as Sara Bennison, Chief Product & Marketing Officer, Nationwide Building Society, notes, to be successful, how that insight is used matters. She says,
“If you just follow what the consumer research and the UX testing to tell you about how to create a good digital journey, you’ll create a really good, efficient one that is absolutely identical to your competitors’. But as the brand person in the room you should then go, okay, which bits are fine to be just like everyone else? And which bits have to be different?”
Innovating with meaningful difference. Innovation is hugely challenging, but also hugely important. If innovation is to deliver to its full potential, it must be aligned with what the brand stands for in people’s minds.
Successful innovation requires more than identifying an unmet need, it requires understanding all the ways in which the consumer to brand relationship might be improved and then doing so in a way that builds on the brand’s existing meaningful difference.
Exploring people’s unmet needs, aspirations and frictions in different moments allows to uncover opportunities, understanding the drivers of choice in different moments, and showing how to win with these opportunities.
New sources of meaningful difference can be found anywhere across the brand experience, but to be successful, that means innovation must be connected to all the other aspects of brand building, it cannot happen in isolation. The most successful brands know what they stand for, and their consumers know it too, and their innovation builds on those expectations. This is why consumer insight is so important to the innovation process. It ensures you understand the who, why and what of your innovation, and guides development and implementation to ensure that potential buyers are aware and appreciate what your brand has to offer.
At Kantar, we advise innovators across the innovation journey to enhance the contribution of their innovation to both short and long-term growth, using the brand’s meaningful difference as the North Star. We apply a brand mindset to every stage of the development process, ensuring that our clients benefit from true differentiation.
Taking this learning forward
Every brand has the power to innovate their meaningful difference, defining their destiny for brand growth. To do so, constantly remind yourself, your team, and your partners of the following guiding principles:
- Design for difference from the outset starts by knowing what your brand stands for.
- Difference for difference’s sake is not enough.
- Brands need to master the art of building their difference meaningfully, to ensure its impact will be both incremental and contribute to long term brand equity.
- Your difference becomes meaningful when you take the time to understand your target audience, their needs and drivers of choice.
Innovation is the glue which ties meaning and difference together and navigates you towards growth.
Get in touch to find out more and subscribe to our newsletter so you don’t miss the second article of this series, which focuses on aligning your innovation and advertising around meaningful difference and how to best ensure that your innovation stays connected and builds meaningful differentiation.