Branding Myths - Differentiate or Die
Customers rarely perceive differentiation, and the few that do, shouldn't be the focus of your marketing efforts.
For anyone new here, I’m the founder of Woo Punch, a brand consultancy rooted in evidence-based brand design. I write about the evidence that debunks brand purpose, differentiation, brand love, loyalty marketing, customer personas, color psychology, mission statements, customer engagement, AdTech, and “hustle culture.”
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THE “DIFFERENTIATE OR DIE” MYTH
To stand out in the market, you must give customers a compelling reason to buy your brand, or you will die.
If you don’t, branding “gurus” Donald Miller, Simon Sinek, and Marty Neumeier will come and murder you.
Differentiation is how your brand is set apart from the competition.
Sounds great, right? Not so fast.
CONCEPTUAL VS FUNCTIONAL DIFFERENTIATION
To understand why “Differentiate or Die” is bullshit, we must break differentiation into two different types. Conceptual differentiation and functional differentiation.
Conceptual differentiation includes any type of differentiation that is intangible or abstract. For example, types of conceptual differentiation include brand personality, brand story, emotional attributes, a brand’s reputation, brand purpose, tone of voice, etc.
Differentiation evangelists claim that, given two functionally identical brands, conceptual differentiation convinces customers to buy one brand over the other.
This naturally assumes that customers know about your brand’s intangible or abstract ideas. This also assumes that most customers make conscious decisions about which brands to buy.
Functional differentiation, on the other hand, includes any type of tangible or core differences between brands. Types of functional differentiation include drastic differences in pricing, distribution channels, convenience, quality, etc. Functional differentiation can be effective when it changes a brand’s functionality at its core, and it is far more effective in all cases than conceptual differentiation.
For example, in most people’s minds, BMW is functionally differentiated from Honda as a luxury brand, but is it conceptually distinguished from Audi or Mercedes? Likewise, Uber is functionally differentiated from Yellow Cab, but is it functionally OR conceptually differentiated from Lyft?
While functional differentiators have their place and are much more effective than conceptual ones, they still won’t help you grow (or maintain) your market share long-term.
If you prioritize functional differentiation, other brands will eventually copy your good idea or ignore your bad idea. Uber used to be the only ridesharing service, but then came Lyft. VRBO is now threatening Airbnb with more ads. Uber and Airbnb can’t rely on their functional differentiators anymore.
If functional differentiation can only get you so far, is conceptual differentiation the key to brand growth long-term? For decades, gurus have gone unchecked, claiming a resounding “Yes!”
Are they right?
The theory of conceptual differentiation has been around since the 1930s, but few people have questioned its effectiveness. Two things are deemed necessary for conceptual differentiation:
Customers must perceive a meaningful differentiation between you and your competitors.
They must find value in what makes them different.
The logic goes something like this:
If you can target a narrow customer base with a conceptual reason to identify with your brand, Then those customers will become loyal and promote your brand to all their friends. Skip differentiation, and you will die. Prioritize it, and you will grow.
If this logic were true, the following statements would also have to be true:
Customers perceive conceptual differentiation.
Successful brands have different customer bases than their competitors since they target different customer bases.
Brands grow by prioritizing heavy buyers and loyal customers.
There are a few brands that differentiation evangelists like to use as examples. The most common I’ve seen are Coca-Cola and Apple. In their minds, customers think of “optimism,” “happiness,” or “the real thing” when thinking of Coca-Cola. When thinking of Apple, customers think of “innovation,” “style,” or “revolution.” Gurus claim these perceptions are the reason for Coca-Cola and Apple’s success.
WHAT DOES THE EVIDENCE SAY?
#1 CUSTOMERS RARELY PERCEIVE DIFFERENTIATION
On average, only 10% of customers perceive a brand’s differentiation (conceptual or functional). Only 3% of people see their brand owning an image or attribute exclusively.1
Even when customers perceive a brand’s personality traits, many change their perceptions over time. When asked to identify their brand with a personality trait, only around 5% of customers can. Of that 5%, when asked the same question 5 weeks later? About 25% change their answers.
Is Apple different? No.
Only 23% of Apple users perceive Apple as different or unique from other computer brands.2 This is especially surprising given that Apple computers look entirely different than other brands, and their operating systems are even functionally different! Macs are just another computer among a sea of computers to most users.
Is Coca-Cola different? No.
Only 8% of Coca-Cola buyers perceive Coca-Cola as different. Pepsi isn’t far behind at 7%.1 Coca-Cola and Pepsi are both below the average of 10% when it comes to perceived differentiation.
If “Differentiate or Die” were true, most brands would be dead, given that most customers don’t perceive them as different.
#2 SUCCESSFUL BRANDS SHARE CUSTOMER BASES, REGARDLESS OF CONCEPTUAL DIFFERENTIATION
Gurus tell us that Nike, Apple, Coca-Cola, Harley, and other great examples of differentiation, have found success by targeting a narrow “customer persona.” If this were true, we would reasonably conclude that highly differentiated brands would have vastly different customer bases.
In other words, Harley wouldn’t appeal to stock brokers, Coca-Cola wouldn’t appeal to pessimists, Apple wouldn’t appeal to accountants, and Nike wouldn’t appeal to lazy people like myself who just need some comfortable sweatpants to wear around the house.
The truth is, whether your brand costs $30,000 (in a car) or $1 (in a can of soda), big brands (even those that seem to have prioritized differentiation) share the same broad customer bases.
The myth that differentiated brands have different customer bases was debunked back in 1959 when comparing Ford owners to Chevy owners. At the time, several marketers claimed there was a sharp contrast in the personalities of Ford owners vs. Chevy owners. However, researchers could not predict buying behavior based on these personality differences.3
Since then, marketing researchers have debunked this myth so many times that there’s even a scientific law that directly contradicts it.
The Duplication of Purchase Law states that brands share their customer bases with other brands relative to market share size, not differentiation.4 Your brand’s and your competitor’s sizes determine which customers are shared among you, not personalities.
For example, gurus claim that Harley-Davidson has successfully differentiated itself against Honda, Suzuki, and Yamaha. I think Harley has tried to differentiate themselves successfully but has it worked? No.
Harley shares the same customers with Honda, Suzuki, and Yamaha. Harley buyers purchase other brands twice as often as they buy Harleys.1
Harley has always seemed to differentiate itself as the motorcycle for tough, blue-collar, American workers. Because of this, gurus claim that Harley has enjoyed a dedicated and loyal “fan base,” growing the brand. However, Harley’s “fans” only contribute 3.5% of Harley’s yearly revenue.
Those “fans” usually buy used motorcycles and often spend more money on accessories than on their motorcycles. Have Harley’s conceptual differentiators helped them or hurt them? After all, the typical Harley “fan” is getting older and likely already bought their last Harley (used).
Harley themselves seem to think their differentiators have hurt them.
Recently, after some financial troubles, Harley has been attempting to broaden their customer base. They have coined their efforts “New Roads to Harley-Davidson,” 5 and are “expanding access and appeal to more people around the world.”
Hmmm. Will Harley die?
Perhaps Harley is now learning the same lesson Coca-Cola learned in 1982.
Before Diet Coke, Coca-Cola had Tab. Tab was strongly differentiated as a soda for women when it first came out. According to Coca-Cola, the sole reason they released Diet Coke was to broaden their customer base to men.6 Today, almost as many men drink diet sodas as women. Diet Coke is now the 2nd largest soda brand behind Coke Classic.
Tab is dead.9
Gurus will tell you that you must “differentiate or die,” yet Diet Coke didn’t seem to get the memo. Rather than differentiating themselves, Diet Coke (and Harley in 2018) did the exact opposite!
#3 BRANDS GROW BY PRIORITIZING LIGHT BUYERS OVER HEAVY BUYERS AND LOYAL CUSTOMERS
Previous statistics showed us that most users of a brand don’t perceive their brand to be different than competitor brands. But what about the few customers that do perceive differentiation? Can prioritizing them help you grow? That would depend on which customers are most likely to perceive differentiation.
For that, we don’t need evidence. Common sense tells us that customers who consistently interact with a particular brand would be more likely to perceive that brand’s differentiation.
If someone goes to a coffee shop once a year, they have no idea what differentiates Dunkin Donuts from Starbucks. On the other hand, my friend Maggie (who incorporated the Dunkin Donuts brand into her engagement photos) knows precisely what differentiates Dunkin Donuts from Starbucks.
A small percentage of light buyers may perceive a brand’s differentiators. Still, heavy buyers and devotees to a brand would reasonably make up most customers who perceive differentiation.
The question is, “how many ‘Maggies’ are out there?” If the “Maggies” of the world have the potential to contribute the most revenue, the name of the game becomes to get more “Maggies!” How do you do that? By trying to convince the “Maggies,” you aren’t a company, but a friend with a personality and similar values!
Then you can gather all the “Maggies” together (or any other customers with a disordered relationship with your brand) to form a “tribe!”
Except for one thing...
The “Maggies” of the world are rare (this is a good thing). Most customers (who aren’t marketers) have healthy relationships with brands, meaning they don’t overthink the brands they buy.
Traditionally, customer loyalty was thought to be a conscious decision to stick to a single brand (sometimes for life). Yet, evidence shows us that customers are loyal to a handful of brands, not single ones. Additionally, that loyalty is mainly unconscious.1
The reality of brand loyalty is primarily* two-fold:
*There is a lot of evidence here that marketers shouldn’t prioritize customer loyalty, but I will only cover two points here.
100% loyalty to a single brand is rare and almost exclusively found in very light buyers of a category.1
New and light buyers are far more valuable for long-term growth than heavy buyers, or “Maggies.” 7
100% LOYALTY TO A SINGLE BRAND IS RARE AND ALMOST EXCLUSIVELY FOUND IN VERY LIGHT BUYERS OF A CATEGORY
Evidence shows that when someone rarely buys from a category, they are more likely to buy from a single brand. However, when someone frequently buys from a category, they are more likely to buy from a variety of brands. The “Maggies” of a brand (customers that frequently buy from a category and remain loyal to a single brand) are unicorns.
Why is this? Humans gravitate toward the easiest choice when it comes to choosing brands.
We simply don’t care about which brands to buy. We aren’t deciding who to marry, for crying out loud! So what’s typically the most effortless choice? Whichever brand comes to mind first.
I am technically 100% loyal to Apple with computers and smartphones. However, I buy a new phone every 3 years and a new computer every 10 years. I used to convince myself I bought Apple because I loved the brand. In reality, I trust Apple, but I don’t love them. I’ve had the same Mac for 10 years, and I’ve never had an iPhone die before I bought a new one.
What if I had the same Samsung computer for 10 years and never had a Samsung phone die on me before buying a new one? I would probably be 100% loyal to Samsung. Samsung could be faster, higher quality, and longer-lasting than Apple, but I stick with the brand I know because I rarely buy phones and computers.
Apple is the easiest choice because I rarely buy phones and computers (and because it’s annoying to switch operating systems). But what if I bought a new phone or computer every 6 months? I would care more about the slight differences in speed and quality of each brand. Therefore, I might switch between Apple, Samsung, and LG.
Gas is an excellent example of this in my life. I buy gas once every few weeks. When I buy gas, I buy gas at whatever gas station is closest to me when I realize I am out of gas. The biggest brands are always the closest to me and, therefore, the easiest choice.
NEW BUYERS AND LIGHT BUYERS ARE FAR MORE VALUABLE FOR LONG-TERM GROWTH THAN HEAVY BUYERS, OR “MAGGIES.”
Heavy buyers account individually for significant sales volume. As a result, many marketers focus on getting heavy buyers to keep buying and to buy more often. However, this is a fallacy. Most brand buyers are light buyers; together, they are the key to growth (and even maintenance)!
THE NBD CURVE
A statistical curve called the Negative Binomial Distribution (NBD) curve was discovered in 1959, and it has been consistently used to predict buyer frequency ratios ever since.7 Niche brands, commodities, services, luxury brands, discount brands, large brands, and small brands, throughout the last 60 years, have all followed this pattern.
The NBD curve states that:
1. Every brand has very large numbers of light buyers, fewer medium buyers, and far fewer heavy buyers.
2. Those very large numbers of light buyers account for far more sales revenue than the very small numbers of heavy buyers.
In 60 years of research, no brand has defied this pattern.8
What does the NBD curve tell us?
Because both bigger and smaller brands follow this pattern, the key to growth for all brands across the board is to get more customers of all buyer frequencies. While marketing to all buyers, you should prioritize getting non-buyers to become light buyers and light buyers to buy a little more often.
Because of this, any strategies that primarily focus on heavy buyers or “Maggies” for growth over non-buyers and light buyers are unrealistic. The case for “Differentiate or Die” states that, by differentiating, you increase loyalty and therefore grow your brand.
But this strategy implies that loyalty is the key to growth. The NBD curve proves otherwise.
Now, imagine the NBD curve is flipped. Again, this never happens.8 In this scenario, most of your customers are “Maggies” (meaning they frequently buy from you and wouldn’t dare switch to another brand). In this fantastical scenario, you would still want to prioritize non-buyers and light buyers in your marketing efforts!
Why? Heavy buyers don’t need to remember your brand nearly as often.
So what does the NBD curve tell us about differentiation?
If “Maggies” and heavy buyers are the most likely to perceive differentiation, and at the same time, they are your least valuable customers (like the Harley devotees), you would be a fool to conclude that you must “Differentiate or Die.” If differentiation is effective at all, its effects are short-term and minimal.
Light buyers will be your workhorses for long-term growth.
With a highly differentiated brand, you turn more light buyers off. Tab learned this hard and turned off half the world in men. Until recently, Tab was still around as a niche brand.9
Are you satisfied with being the next Tab? Fine. Growth isn’t the only measure of success that matters.
Want to be the next Diet Coke? Stop obsessing about differentiation, customer personas, or customer loyalty.
Be as easy to buy in as many buying situations for as many people as possible.
Thanks for reading Branding Bullsh*t! Subscribe for free to receive new posts and support my work.
 How Brands Grow
 Evidence Concerning the Importance of Perceived Brand Differentiation - Romanuik, Jenni, Byron Sharp, and Andrew Ehrenberg (2007)
 Psychological and Objective Factors in the Prediction of Brand Choice: Ford versus Chevrolet - F.B. Evans 1959
 Towards an Integrated Theory of Consumer Behavior - Ehrenberg, A. S.C. 1996
 Category and Brand Purchase Rates (Still) Follow the NBD Distribution - John Dawes, Giang Trinh 2017
 The Story of TaB