What’s the difference?

Imagine you have just finished presenting your brand plan, the fruit of the brand team’s many months of careful analysis and strategising. After the polite thanks for your hard work, the most senior person in the room furrows their brow, looks you in the eye and asks you directly: “If I were now to sit through the brand strategy presentations of our competitors, what would be the difference between their brand strategy and yours?”

Senior business leaders have learned that this is a very powerful and useful question. They know that when competing brands go ‘head on’, each trying to do essentially the same thing but more effectively, the market becomes a war of attrition. Like First World War battlefields, the ‘front-lines’ of market share don’t change much and each sides’ efforts cancel the other out. Marketing battles are rarely won by direct, obvious methods.  Knowing this, what your leaders are hoping to hear is that you understand one of the most fundamental rules of both military and brand strategy: do something different.

In most of the companies I’ve studied, these senior executives are disappointed. Their brand strategists respond only with examples of limited, tactical differentiation. They point to small differences in product features and claims, semantic differences in the messaging or minor pricing differences that dissolve when health economic value assessments are applied. What your leaders want to hear, but very rarely do hear, is that your brand’s strategy differs from the competitors’ strategy, and not just at a tactical, detailed level. Only in relatively few firms can the brand teams clearly demonstrate strategic differentiation and, in the following few paragraphs, I’ll describe how those exemplary firms are able to do that when most of their peers can’t.

Strategy is one of the most misunderstood and abused words in any language, but the best firms define brand strategy clearly. In essence, brand strategy is your set of choices about who you create value for and how you do that. In many markets, competing strategies offer essentially the same thing, in essentially the same way, to essentially the same people.

‘Strategy is one of the most misunderstood and abused words in any language, but the best firms define brand strategy clearly’

By contrast, strategic differentiation occurs when your choices about how to create value and for whom are significantly different from those of your competitors. Many brand strategists, lost in the hands-on detail of implementation, don’t notice this issue with their strategy. You will get more value from this article if you now take a moment to reflect on how differentiated your own brand strategy really is. This is something I’ve done with many brands over the last 25 years. And when I compare the plans of competing brands and clear away the hyperbole and wordsmithing, I find that only very few plans achieve genuine strategic differentiation. This reality raises an important question: ‘What do those few firms that strategically differentiate do differently from those firms who don’t?’

The influential Theodore Levitt famously said that if you’re not thinking segmentation, you’re not thinking. In practice, I’ve rarely seen a brand plan that didn’t think about segmentation, but while most give it only superficial consideration, the best firms think about it more deeply and more originally.

The weakest brand teams base their strategy on the segments implied by market research data, such as prescribing patterns or patient disease stage. In our industry, where most market data is supplied by a few dominant firms, this segmentation approach inevitably leads to competing brand strategies using the same, or trivially different, segmentation. Blindly following industry standard segmentation makes strategic differentiation impossible.

Marginally more differentiated are those brand strategies that use their own market research and data to define segments based on needs and motivators, such as ‘conservative prescribers’ and ‘co-morbid patients’. Since it uses proprietary segmentation, this is a better basis for strategic differentiation. But it neglects a core reality of today’s market: preference is not created by prescribers or patients alone but by multiple stakeholders.

Those firms that achieve strategic differentiation begin by thinking about contextual or situational segmentation. Every usage decision is made in a context defined by a particular combination of payer, professional and patient needs.

‘What your leaders want to hear, but very rarely do, is that your brand’s strategy differs from the competitors’ strategy, and not just at a tactical, detailed level’

The best firms segment the market according to these usage decision contexts or situations. This is harder to do than simpler approaches, but that difficulty and complexity means that their understanding of their market’s segmentation is almost certain to be different from that of their competitors. Segmenting by situation allows for multiple stakeholders and is the foundation of strategic differentiation.

Since strategy is a set of choices, strategic differentiation means making different choices from those of your competitors. Situational segmentation, as described above, presents you with choices about how to allocate effort and resources between decision contexts or situations. But firms that strategically differentiate and those that don’t make those important choices in very different ways.

The weakest firms don’t make a resource allocation choice at all. They spread their efforts over the whole market, wasting effort where it won’t pay off and, consequently, under-investing in market segments that could be won. Sometimes this weakness is mitigated by intelligent local sales team planning, but this is rarely enough to fully compensate for an indecisive brand strategy that abdicates its responsibility to choose between situational segments.

Most firms are a little better than this. They allocate effort between situational segments according to how large those segments are. This obviously directs efforts to where market share is, but it neglects the important fact that segments vary not only in size but in how winnable they are. This approach to resource allocation results in strategic similarity rather than strategic differentiation.

Those firms that achieve full strategic differentiation are guided by segment size but also by segment winnability. That is, how appealing the brand is to that segment. These exemplary firms focus on attractive, winnable segments and withdraw from those that are neither. When attractive segments aren’t immediately winnable, they build competitive strength to make them winnable in the future. And when segments are winnable but not attractive, they allocate the minimum necessary resources needed to extract what limited returns are possible. This ‘portfolio of segments’ approach is much more nuanced and subtle that weaker firms. And, because segment winnability is the result of the firm’s distinctive strengths, resource allocation between segments is different for every company. Consequently, this approach leads to strategic differentiation, but it is only half the story.

Defining situational segments and allocating effort according to the attractiveness and winnability of those segments allows the best firms to go halfway towards strategic differentiation. These two techniques, very different from typical practice, lead them to create value in different situations from their rivals. But to fully differentiate their strategy, they must also create value in different ways.

The least differentiated strategies make the essentially same value proposition as their competitors and they make that same undifferentiated offer to the whole, or most of, the market. Again, local activity may allow some limited tailoring to customers’ peripheral needs, but this is rarely enough to mitigate for a fundamentally undifferentiated core value proposition.

Better companies tailor their value proposition to individual market segments, for example by adapting added-value services and support. But if they are using the same industry-standard segments as their rivals, their value propositions, which aim to address each segment’s needs, will also be industry standard and undifferentiated.

Those firms that achieve strategic differentiation build their segment-specific value propositions around the needs of their each of their targeted situational segments. In particular, they aim to meet the higher, often non-clinical and intangible needs of the segments, such as confidence, trust and ease of use. And since those situational segments are defined and targeted using different methods from their rivals, as described above, those needs-based, segment-specific value propositions are strongly differentiated. In other words, differentiated segmentation enables differentiated allocation of effort, which leads to differentiated value propositions. Together these amount to a strongly differentiated strategy.

It’s important that the brand strategy review is an effective, value-adding process. In the best companies, this is enabled by leaders asking their strategists four testing questions. Those strategists anticipate the second of those questions, ‘what’s different about our strategy?’, by adopting differentiated approaches to segmentation, targeting and value proposition design. These are not blunt, generic tools that every firm uses in the same way. The secret to using these tools in practice is nuance, which also means that the strategic differentiation of brand strategies is not immediately obvious to rivals. This makes strategic differentiation harder to copy and more sustainable.

‘Marketing battles are rarely won by direct, obvious methods – so the question is: how does your brand strategy differ from that of your competitors?’

The practice of strategic differentiation depends on some critical capabilities. Brand teams must understand and be able to use situational segmentation. They must understand the multiple factors that determine each segment’s attractiveness and winnability. They must be able to identify targeted segments’ higher, non-obvious needs and, working backwards from those, construct a value proposition that is much more than the regulatory approved product claims. They must meet the needs that really drive customer preference in that situational segment. These capabilities are not common in the brand teams of life sciences companies. But, with careful talent management, they are attainable. And, if you want to give your manager a good answer to his question about how your strategy is different from your competitors, these capabilities are essential.

Professor Brian D Smith is a world-recognised authority on the evolution of the life sciences industry. He welcomes questions at brian.smith@pragmedic.com. This and earlier articles are available as video and podcast at www.pragmedic.com