Brand differentiation: stand out or fade away

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Now, let’s discuss branding…

What you’ll learn about brand differentiation

– What is differentiation?
– Why it matters, now more than ever?
– How differentiation builds on a truth of your business?
– How differentiation helps you stand out from your category?
– How differentiation gives your audience a reason to care?
– When will differentiation ever end? (Spoiler alert: never.)

Why differentiation matters

We live in a world overflowing with options. From the supermarket shelves to SaaS, consumers are constantly being asked to make a choice. And the more comparable products, services, and brands on offer, the harder it is for that choice to be made. An abundance of options begins to feel more like a burden than a blessing. Consumers hesitate, second-guess, leads go cold, and carts are abandoned.

Psychologist Barry Schwartz calls this all-too-familiar experience the paradox of choice. This is the idea that the more options a person has, the more difficult it is to make that decision and the less satisfied people feel with the decision they end up making. This isn't just because the act of choosing requires more cognitive effort when there are more options, but because people are also likely to experience FOMO and ultimately regret the choice they’ve made.

“Learning to choose is hard. Learning to choose well is harder. And learning to choose well in a world of unlimited possibilities is harder still, perhaps too hard.”

— Barry Schwarz, ‘The Paradox of Choice: Why More is Less’

The slow march towards sameness

Although Schwartz coined the term 'Choice Paralysis' over 20 years ago , today it feels harder than ever before to make satisfying choices

Not only do today's consumers have more choices, but the brands they're being asked to choose between are becoming increasingly difficult to differentiate. Rebrands follow the same trends. Websites and apps use uniform code libraries and UX principles. And in an effort to become more digital-friendly, logos are designing out what once made them special.

Everything is gradually converging toward the average, and AI will only accelerate this trend.

In the next edition of this newsletter, we'll dive into how AI is transforming design, including the ways we at Koto are using it to push our creativity, achieve the previously unimaginable, and work more effectively. However, it's important to remember that AI, at its core, is a technology that recognises and learns from patterns. While it can be used to spark or execute new ideas, it also makes it easier to replicate what’s already been done. Used unimaginatively, AI will proliferate brand replicas.

It’s time to think different

The good news: your brand can be the key to helping consumers overcome choice paralysis. From a commercial point of view investments in differentiation deliver returns that far exceed their initial investment, driving market share growth and unlocking premium pricing strategies for your business.

But what actually is differentiation? Miriam Webster defines it as ‘the act or process of differentiating.’ While technically correct, this definition is entirely unhelpful for our current purposes. This is because it suggests that the more different a brand is, the more successful the differentiation. In reality, this is rarely the case.

At Koto we prefer a less prescriptive, yet more practical definition: that a brand’s point of differentiation should answer three relative questions. Does it build on a truth at the heart of a business? Is it distinctive within the category? Will it feel compelling to the audience?

In this edition of OFF Brand we'll guide you through what it takes to answer these three criteria.

What will soon become clear is that differentiation is not a one-size-fits all strategy. There are countless choices open to a brand and business on its journey to differentiation. But hopefully, with the help of this newsletter, you will feel empowered, not paralysed, by this abundance of choice.

Differentiation is true to your business

Differentiation is more than just optics; it’s a strategic, intentional process that should be rooted in the truth of your business. Without this foundation, your brand’s point of difference risks feeling disconnected from the actual experience you deliver, ultimately undermining your brand’s integrity and disappointing your customers.

Yet while it should be rooted in truth, brand differentiation isn’t an exact science. There’s no single objective factor or universal formula to follow. Instead, there are several key starting points to explore when differentiating a brand.

At Koto, we kick off most projects with what we call an 'immersion': a dedicated research process that combines interviewing internal and external stakeholders, reviewing audience insights, and assessing cultural and category trends. This helps us uncover the essential truths that will serve as the foundation for a brand’s differentiation.

Before you dive into an immersion of your own, there are a number of ways into uncovering a truth for your brand.

Starting point 01: Product

A great place to begin, and perhaps the most obvious, is your product. This could include everything from its unique features or attributes, to how the product is designed or made, or even where it’s from – think ‘Swiss design’ or ‘Made in America’. However, whatever sets your product apart, it’s crucial to identify a differentiator that doesn’t just stand out against the category as it exists today, but also one that your competitors can’t easily replicate in the future too.

Some questions to consider:

• Is your product a market-leader? (Think ‘No one got fired for buying IBM’ )

• Does your product interface with the other products your consumers own or use? (Think Slack)

• Is your product more powerful or does it perform to a high standard? (Think Porsche)

• Is there an ownable technology that powers your product? (Think Dyson)

• Does your product meet rigorous technical standards or is it reliable? (Think Volvo)

• Is your product made in a significant geographic location? (Think Swatch)

Starting point 02: Experience

Rather than going spec for spec with competitor products, another way to find your truth is by unpacking the experience you offer your customers. This is relevant to both physical and digital experiences, and could relate to something that’s fundamental to your offering or any extra value-added services that enhance the customer experience.

Some questions to consider:

• Is there an ownable aspect of your user experience or interface? (Think Tinder’s swipe mechanic)

• Do you serve a particular need or desire, above all else? (Think Amazon Prime’s commitment to convenience)

• Is your after-care support better than anyone in your category? (Think Applecare)

• Do you have an outstanding warranty or customer promise? (Think Rimowa)

• Can users customize or tailor your product to be their own?(Think Tylko)

• Do you have a loyalty or rewards scheme that adds value to your offer? (Think Amex)

Starting point 03: Price

Price differentiation is a tricky strategy that can easily turn into a zero-sum game, increasing your market share at the expense of your profit margins. However, when approached strategically and in the right context it can still be effective, especially when price sensitivity is a major factor for customers. To avoid diminishing your brand’s perception, it’s best to reframe price as a reflection of value, not quantifiable cost.

Some questions to consider:

• Is everything about your business laser-focussed on budget and bottom-line? (Think Hans Brinker)

• Do you have a pricing strategy that strips back all the added extras? (Think Ryanair)

• Do you have a commitment to price matching? (Think John Lewis’ ‘Never knowingly undersold’)

• Is your price iconic or fixed? (Think Poundland or Dollar Tree)

• Do you offer economies of scale when customers purchase in bulk? (Think Costco)

• Does your business model or infrastructure challenge a price monopoly? (Think Warby Parker)

Starting point 04: Channel

Where a brand shows up can be a key factor in differentiation, shaping how people perceive it through association. This goes beyond where its products or services are sold – whether through D2C models or in high-end department stores. The non-transactional spaces a brand occupies, for example through advertisements or sponsorships, will also play a significant role in shaping the associations it builds over time.

Some questions to consider:

• Does your brand turn up in convenient places, where people need it most? (Think McDonald’s)

• Or is your brand in a location where people visit with specific intention? (Think Ikea)

• Does your brand turn up in exclusive, or culturally relevant places? (Think LVMH)

• Is your brand an intermediary or marketplace? (Think eBay)

• Does your business model side-step conventional distribution? (Think Dollar Shave Club)

• Does your business currently or does it have capacity to sponsor cultural events? (Think T Mobile)

Starting point 05: Purpose

A purpose defines your company's reason to exist, beyond making money. Top of mind are brands that differentiate through an altruistic cause. But we can also think of purpose more broadly, as the transformational changes a brand seeks to create in people's lives, culture, or the world at large.

Some questions to consider:

• Is your business known for its social or environmental commitments? (Think Patagonia)

• Does your product or service cause less harm than your competitors? (Think The Body Shop)

• Does your brand stand against the malpractices of the category? (Think Tony’s Chocolonely)

• Does your brand stand in support of a defined group? (Think Dove)

• Does your business set out to improve or replace a fundamental aspect of society? (Think Coinbase)

• Will your business change perceptions or habits of your consumer group? (Think Backmarket)

Where to start?

Many of the starting points we touched upon above can be true of your brand at once. For some brands there will be a clear differentiator to double down on, but most will have multiple viable starting points. And as we discussed at the beginning of this newsletter, having many options can make any decision difficult.

In the next chapters, we’ll focus on the context of your category and your audience’s preference in differentiation. These factors may help guide your decision, but they won’t dictate exactly how your brand should differ. As Al Ries and Jack Trout state in The 22 Immutable Laws of Marketing, "There is no objective reality. There are no facts. There are no best products. There are only better according to certain metrics."

Perception is reality. Brand differentiation might build on a truth at the heart of your business, but choosing which truth requires conviction. Research can guide you, analysis can inform you, and brand studios like Koto can support you in this decision. But ultimately the final decision is yours to make.

Choice is hard, but choose you must.

Branding is about accepting that you can’t be everything to everyone. Just as excellence comes at a cost, so does successful differentiation. To be known for one thing often means placing less emphasis on other aspects of your business.

“Difference is deviance. Difference is permutation. Difference is a commitment to the unprecedented, which is another way of saying it is a commitment to letting go.”

Different: Escaping the Competitive Herd, Youngme Moon

But choosing a single core point of difference, or a few closely connected truths, can pay off in powerful ways.

Internally, a clear focus allows your teams to make strategic, high-impact investments that drive ROI. Externally, simplifying your message helps capture attention and keeps your brand top of mind, no matter how crowded or competitive the category.

Speaking of which…

Differentiation is distinctive to your category

As humans, we naturally categorize the world around us. It’s a shortcut that helps us make quicker and better decisions based on expectations formed from past experiences. The same principle applies to branding. Think about how store shelves or ecommerce menus organize products into clear, intuitive categories in order to make the shopping experience smoother and more familiar.

Although categorisation might be intuitive, building a brand isn’t about copying every convention of your category. Instead, effective differentiation requires a brand to find the right balance between fitting in and standing out; between leveraging the positive associations of a category while subverting them just enough to create distinction.

But first, which category?

Since distinction is always relative, the first step is to define the category your product or service is expected to belong to. Understanding this context helps reveal the expectations and perceptions people already hold—giving you something to build on, challenge, or creatively subvert.

If you're in a well-established category, this is often straightforward. But even if your offering feels entirely new, there are still existing conventions you can tap into. Ask yourself: Who are your competitors? What product, service, or behavior might you replace? Does your solution use similar technology or deliver similar outcomes? Where might it sit on store shelves, ecommerce sites, comparison blogs, or at trade shows?

Answering these kinds of questions helps you find your starting point, and understand how you can stand apart.

3 strategies for category distinction

In “Different: Escaping the Competitive Herd”, Harvard professor Youngme Moon argues that the more competitive a category is, the more brands tend to resemble each other. Think how a slew of vegan alternatives adopted the attitude of Oatly or how many B2B SaaS products have uncannily similar illustration styles.

Written in a refreshingly readable style befitting of the title ‘different’, in one chapter she describes standing in the cereal aisle. She sees healthy cereals. Natural cereals. Cereal for kids. More fibre. Less sugar. More of this. Less of that. Everything is different in the same ways. Every brand plays by the expected rules of cereal.

The book continues to outline three strategies for category differentiation: Reverse Brands, Breakaway Brands, and Hostile Brands.

While not an exhaustive list, these approaches offer a solid range of ways to stand out. So let’s explore them in more detail.

01. Reverse brands

Reverse brands embrace the philosophy that less is more. They remove unnecessary features to simplify their offering. On the face of it this might sound reductive, but as Moon explains: "reverse brands create a kind of tilt in the surface—of progress, of evolution, of expectation. They draw us down a divergent path by applying pressure in exactly the place where we least anticipate it."

Take IKEA. Customers are asked to locate their own furniture in a warehouse, transport it home, then assemble it themselves. The experience isn’t what you’d consider aspirational. Yet, at the same time, IKEA offers free childcare and an on-site restaurant serving famous Swedish meatballs. This contradiction highlights the core behavior of reverse brands: "It looks to create a symbiosis of elements that we’ve been trained to believe don’t belong together. The idea is to be an oxymoron, and an agreeable one at that."

Reverse brands are also particularly powerful at cutting through in categories rife with feature fatigue, instead reminding customers why they are interested in a product or service in the first place. Apple, for example, have elevated their brand beyond a like-for-like comparison in computing power - GB storage, RAM, CPU and so on. Instead Apple’s brand reminds people that computing power is a means to an end, an experience defined by the brand’s three principles - ‘simple’, ‘human’, ‘creative’.

02. Hostile brands

In a world defined by seamlessness, Hostile brands introduce new friction into their category. They play harder to get than their competitors, they are more divisive and they make us work harder for their custom.

At first, this strategy feels counterintuitive. But look closely and you’ll begin to see hostile brands everywhere. Marmite tells us if you don’t love the taste, you’ll hate it. Ben and Jerry's champions altruistic causes and isn’t concerned with what anyone thinks about it. Streetwear brands like Supreme or Palace create scarcity, forcing customers to queue for hours for the opportunity to buy a t-shirt. Even Apple can be found behaving with hostility, creating friction whenever users want to repair their devices and asking users to change adapters every few product generations.

Moon puts it this way: “Hostile brands erect barriers to consumption, barriers that could in many ways be considered tests of our affiliation.” In weeding out indifference, they ensure the consumers that remain are engaged, curious or devout. And by standing firm and refusing to concede these brands also feel more authentic, achieving cult-like status.

03. Breakaway brands

The previous examples show how brands position themselves within a category. Breakaway brands, however, intentionally place themselves outside of their conventional category.

Breakaway brands respect the power of categorization whilst also understanding it is an arbitrary social construction. They defy expectations to create something novel and intriguing.

Moon gives a few examples of breakaway brands: Nest, which moved from thermostats to computation. Swatch, which redefined watches as fashion accessories. And Sony’s Aibo, which was marketed as a pet not a technology, permitting users to view any technological failures as personality quirks they might otherwise expect from a dog.

An example of a breakaway brand Koto helped build is Need. Need might conventionally be seen as a cancer insurance platform. However, in the Korean market where Need first launched, most customers already have health insurance. To avoid prompting the difficult question - ‘Why buy what I’ve already got?’ - Koto instead positioned Need as the world’s first ‘Cancer protection system’. This shift allowed customers to view Need’s product as a new opportunity to invest in their future health and create emotional security, rather than an insurance against the worst-case scenario.

Warning: a little distinction goes a long way

While some brands may benefit from being truly original, differentiation is rarely about being as different as possible. Disregarding established category norms or expected design tropes can confuse consumers. Take Jaguar’s recent rebrand as a case in point. Not only did it not build on an important truth at the heart of the carmaker’s business: its heritage. The rebrand felt uncanny because it didn’t even seem like it came from a car brand at all.

Jaguar has strong brand recognition, and people know exactly what they do. However, for a start-up or lesser-known brand, moving too far away from a category can cause even greater risk, and leave them out of the consideration set entirely. As a result, these brands spend more time explaining what they do, instead of why they’re different.

For similar reasons, Bloom’s CSO Ed Hayes champions the power of slow disruption in his article ‘We need to talk about disruption’ for Creative Review. “The slower disruptors don’t just add value to consumers”, he writes, “they make sense business-wise, since they’re far more likely to achieve longevity. Brands that aggressively enter a category at breakneck speed don’t usually last.” In the long run, less proves more.

Erring on the side of caution when it comes to category differentiation, however, doesn’t always lead to conservative brands. Take the rise of so-called DGAF brands: such as Duolingo’s ‘Wholesome unhinged’ mascot, or Nutter Butter’s fever-dream of a TikTok feed. Both have achieved significant levels of differentiation without stepping outside the boundaries of their respective categories. Instead they’ve achieved this through creative expressions that resonate with people emotionally, something we will explore in the next chapter of this newsletter.

Differentiation is compelling to your audience

Differentiation isn’t about your business, it’s about your audience. So whatever truth you've decided will set your business apart or however you’ve decided to position yourself within the market, people will only care if it’s relevant and meaningful to them. The best brands appeal to both reason and emotion to do just this.

The power of emotion

Conventional wisdom suggests that decisions are best made rationally: by weighing options, balancing pros and cons, and arriving at a logical conclusion. Emotions, by contrast, are seen as irrational forces that cloud judgment. Keeping emotions in check, so the story goes, leads to better decision-making.

Recent research, however, has fundamentally challenged this view.

Psychologist Daniel Kahneman and his team won a Nobel Prize for a study revealing that most people make financial decisions based on emotions and personal experiences rather than logic. Kahneman's research found that emotions drive about 90% of our decision-making, with logic influencing only around 10%. Further studies support this, showing that emotions help us make quicker, more relevant decisions that align with our needs and desires, and even strengthen our commitment to those choices over time.

In this same way, brands that also connect with consumers on an emotional level can drive preference and even build loyalty beyond the point of purchase.

The brand ladder: a model to uncover the emotional value of your business

Created by Professor Kevin Lane Keller in his book ‘Strategic Brand Management’, the ‘Brand ladder’ has become one of branding’s most widely used tools to help businesses understand and strengthen their emotional positioning. At Koto, we tend to use a version of the brand ladder that slightly deviates from Keller’s original model, but operates on the same principle.

Think of the brand ladder as a way to illustrate the different levels of value your brand provides. At the bottom, you'll find basic attributes and functionalities; similar to the truth(s) of your business that we discussed in the first chapter of this newsletter. As you travel upwards, however, the ladder begins to reveal emotional benefits. It is these benefits that feel more meaningful and compelling to the consumer.

As with all models, this is just one of many tools that can spark ideas. But what the brand ladder is particularly good at is bringing about a shift in perspective - from focussing on what the business offers, to how that offering resonates emotionally with customers.

Case studies: from functional to emotional value

Here are some Koto case studies that explore how we at Koto have supported clients in bringing about this shift in their brand story: away from what they do, and towards how it feels for their customers.

🍭 Fluz

From functional value: A do-it-all Fintech

Loyalty program, banking app, social network: Fluz is easy to use but not so easy to define. To stand out in a saturated Fintech market, the strategic challenge was to uncover the value these individual features create together.

To emotional value: ’Life on Max’

Fluz helps everyone maximize their money, a state of mind we celebrated in the brand idea ‘Life on Max’. This idea led to a design system with candy-colored gradients, bold ‘Greed Condensed’ fonts and art direction that brought to life the magic of maximal.

🐩 Dis-loyalty (Ennismore Hotels)

From functional value: A new loyalty program

Ennismore owns a diverse collection of hotels across various locations. With a new travel and food loyalty program, they aimed to encourage customers to explore more of their portfolio.

To emotional value: ‘Beat boring’

Introducing Disloyalty, a curated travel and food membership that breaks habits by rewarding firsts. This program was built around the brand idea ‘Beat boring’, daring hotel-goers to think differently about where they eat and stay through an expressive design system, energetic motion, and defiant copy.

🤖 Uniqode

From functional value: Enterprise-grade QR codes

QR codes are no longer just those janky little things that you download from the internet. Today the largest companies in the world rely on them for the successful management of their daily operations. In the world of QR-codes, Uniqode offers unrivalled security, support and scalability making it the first, and arguably the only, platform that was built to be enterprise ready.

To emotional value: ‘From IRL to URL’

QR codes enable a smooth transition between the physical and online worlds with just one click. We visualized this idea through the tactile craft of stitching, symbolizing the connection of two worlds with a simple needle and thread. This concept became the core of our visual identity, highlighting Uniqode’s ability to help businesses move effortlessly between IRL and URL and back again.

The enduring power of simple ideas

A compelling story links a brand’s functional value to its emotional appeal. The simpler the story, the more powerful it becomes.

Here the challenge is finding the right balance – distilling an idea so that it’s intuitive and memorable for customers and immediately useful for internal teams, in a way that doesn’t feel reductive or generic. At Koto, we use a litmus test to ensure an idea’s simplicity endures: “Could a 10-year-old understand this idea?” If the answer is ‘yes’, then we are on the right track.

When and how to test what is emotionally compelling to users (if at all)

In this section of OFF Brand, we’ve made the case for crafting emotionally compelling brand experiences. At this point, it might be tempting to simply ask customers what they like, value, or want. But this approach is ill-advised.

While user insights and cultural analysis are valuable tools, directly asking consumers about their preferences often produces answers rooted in the familiar. The opinions you receive will skew toward what's already available in the market, often echoing what your competitors are doing. What’s new or different can feel unfamiliar, even uncomfortable, making it harder for consumers to articulate a desire for it. This is particularly a problem insofar as your strategic point of difference should be future-facing, setting the direction of your business for the next 5-10 years and beyond.

User testing should never replace internal conviction about the direction of your brand. However, once you’ve clearly defined your strategic intent, testing becomes a useful tool. Here you’re not asking your customers about their preference in general. You’re asking: Which execution best delivers on idea X or evokes emotion Y?

In short: the goal isn’t to let users define your brand’s future, but to ensure the creative expression lands with the intended impact.

Differentiation is never done

So you’ve come this far. You’ve identified the key truth that will distinguish your business. You’ve defined your strategic position within your category. You’ve now pinpointed the emotional value that will make your brand compelling. But this is just the beginning.

Once decided upon, you’ll want to commit your point of differentiation to paper across your brand strategy. It will then serve as the guiding intent at the core of your business, informing every decision it makes, both internally and externally.

If you’ve read the second edition of OFF Brand, What is Brand Strategy and Why Your Company Needs One, you’re probably already familiar with this concept. If not, open it in a new tab and give it a read once you’re done here.

What we want to emphasize in this newsletter is that, through consistent repetition over time, your brand will steadily reinforce its point of difference, ultimately securing a distinct place in the minds and hearts of your audience.

What’s different today becomes normal tomorrow.

Beating the same drum to reinforce your point of difference is crucial. But eventually that rhythm must evolve. As your business grows, so must your brand. Your offering may expand, or your core strengths may shift. And with that evolution, the positioning that once fit perfectly may no longer reflect the scale or direction of your business.

Your most significant change, however, is likely happening outside the four walls of your business.

We, as humans, have an innate tendency to take for granted what once delighted us. This idea is known as the hedonic treadmill. Historical examples include major technological breakthroughs that are now seen as everyday utilities: running water, electricity, the internet, smartphones. But the hedonic treadmill is all around us, and over time it will affect how compelling your point of differentiation will feel to customers.

To put it simply: a company might build a brand around a specific point of differentiation. Customers respond positively, but over time, competitors imitate this point of differentiation until it becomes standard across the category. Customer satisfaction recalibrates. The standards for standing out in the category rise and what once felt remarkable is now ordinary. That company must now refine or redefine its point of differentiation.

Returning to the beginning is not starting again

Rediscovering how your business can stand out will mean going back over the ideas explored in the earlier chapters of this newsletter. This time, you'll be looking at them with more clarity and a new perspective.

So whilst your point of differentiation may need to evolve, it’s important to recognise the role it’s played in getting your brand to where it is today. As it’s what people currently associate with your brand, any shift should feel like a natural progression, not a break, from that foundation.

It’s important to note that growing up doesn’t necessitate getting boring. There’s a common misconception that as brands scale for mass appeal, they must shed the uniqueness that fueled their early success and become more vanilla. We’ve seen this with rebrands from the likes of Robinhood to BackMarket, the latter a step away from Koto’s original work 5 years ago. In both cases, once-disruptive brands toned down their distinctiveness with the ambition of going mainstream. At Koto we believe it isn’t just unnecessary, it’s counterproductive. The result is a strategic loss of identity, making them blend in with the very incumbents they once stood apart from.

In the fourth edition of OFF Brand - “Brand Evolution or Revolution? Knowing Why and When” - we explored what’s involved in refreshing an established brand. The key takeaways still apply here: standing out isn’t something you solve once. It’s a continual process of refinement. As your brand grows, progress doesn’t mean letting go of what works. It means pushing it further, continuing to build on your new strengths and existing equity in tandem. Because your point of difference isn’t a temporary tactic you should grow out of, it’s a core asset that should grow with you.

Wrapping up

In this edition of OFF Brand, we’ve dived into the topic of differentiation. An ongoing, complex and deeply personal journey for any brand that can roughly be boiled down to three questions:

• Does it build on a truth at the heart of a business?

• Is it distinctive within the category?

• Will it feel compelling to the audience?

Deep-dive further with more reads

To further enhance your brand’s ability to answer these three questions, you might also want to dig in to the following resources:

• Something shorter to skim: “Are rebrands starting to look the same? The challenges defining commercial design” - by Elizabeth Goodspeed, for It’s Nice That

• Something longer to read: “Different: Escaping the Competitive Herd” - by YoungMe Moon

• Something to watch: ‘Mark Ritson on defending differentiation - IGNITE 2023’ for Kantar

Let us know what you think

Hit reply or comment:

• What challenges or opportunities have you come across when differentiating your brand?

• What resonated with you the most?

• What else could we have talked about when it comes to brand differentiation?

• Any suggestions for our next newsletter?

Like any new endeavour this took slightly longer than planned, so we hope you liked what you read. Make sure to sign-up to receive our next issue in your inbox.

See you in a few weeks for the next edition of OFF Brand. Let’s hope it’s different.