2. Claims. In the world of consumer goods, claims are often related to the health efficacy of a product or ingredient. And claims add substantial value when they are tied exclusively to a product and can be held for a significant period of time. In 2006, Mars developed a new line of chocolate bars, CocoaVia, which it labeled “heart-healthy” because of the demonstrated cardiovascular benefits of flavanols, a natural antioxidant in cocoa beans. The claim provides a sustainable point of differentiation because Mars owns patents related to processing technologies that are designed to retain higher concentrations of flavanols than regular chocolate manufacturing processes. The company doesn’t release sales figures but says the product is “selling well,” and it is expanding the line.
Claims, however, can carry a downside risk, precisely because a competitive advantage that cannot be defended may quickly undermine any initial benefit. Competitors will often exploit a claim that is made for a widely available ingredient. Take the example of Quaker Oats, which spent a small fortune proving to the satisfaction of the U.S. Food and Drug Administration that, yes, oat bran can help lower cholesterol. Quaker (a unit of PepsiCo) may be the premier oatmeal brand, but oats are a commodity, and Quaker did not own any special technologies related to this claim. General Mills, which makes Cheerios, was free to conduct its own piggyback studies and broadcast the cholesterol-lowering benefit widely in its product marketing. The result: Sales of Cheerios climbed 11 percent, while Quaker’s sales actually fell 3.5 percent.
3. Ingredient synonymy. Think of baking soda, and what name comes to mind? How about peanuts? Or more recently, pomegranate juice? Arm & Hammer, Planters, and POM Wonderful, respectively, have each carved out an enviable position by becoming virtual synonyms for their category. Such domination affords pricing power for products that are essentially commodities. It also builds a barrier to competitive entry and allows economies of scale and higher margins.
Perhaps more important, such synonymy with an active ingredient can provide a powerful platform for entry into adjacent categories. Planters successfully ventured into candy bars, and Arm & Hammer launched a line of baking soda toothpastes. In these examples, the ingredient itself provides the competitive protection. Crest and Colgate could — and did — develop baking soda toothpastes, but they did not “fit” as well in the consumer’s mind. And POM Wonderful has been able to leverage its dominance in juice into adjacent categories, including blends, teas, and POMx antioxidant supplements. The company’s sales grew almost 10-fold in the four years after its 2002 launch.
4. Unique brand characteristics. Strong brands can build an identity in consumers’ minds that transcends products. Few people can think of, say, the Wall Street Journal and not get a sense of authority in business news. For innovation purposes, such a positioning can provide a springboard for new opportunities.
An example can be found in the soft drink category. The Coca-Cola Company’s primary asset is the formula of its flagship soda, and the company built on that taste when it developed and launched Coca-Cola Zero, a low-calorie product intended to taste more like regular Coke than Diet Coke. PepsiCo couldn’t mimic Coca-Cola Zero, naturally, because its consumers want a product that tastes like Pepsi. It took Pepsi two years to develop a new diet cola called Diet Pepsi Max that leveraged its own unique taste assets — much longer than it generally takes to bring out a traditional line extension.
Other characteristics that can provide unique advantage include a meaningful heritage, which gives a certain emotional heft to new products or services from, say, Singapore Airlines. Positioning itself as the quintessence of what Westerners think of as “Asian values,” the carrier has successfully emphasized its hospitality and high-tech amenities, including new airplanes and in-flight entertainment systems. And there’s value in being recognized as dominant in one area; ESPN has used its position as the “Worldwide Leader in Sports” to expand successfully into dining, with its ESPN Zone chain of theme restaurants.