Differentiating the Brand in a Crowded Market - The Trader Joe's Way

Your business is already in a slow decay to obsolescence if you don’t have a plan to differentiate the brand.

A Favorite Stand-Out Brand Experience

Through my volunteer work with a local non-profit organization, I have a front row experience with brand differentiation in action. We rescue food that is headed to landfills; our small volunteer army prepares nutritious meals, and we distribute the meals to food insecure individuals and families. It is great for the environment and great for our neighbors in need.

A key supplier to our food supply is the local Trader Joe’s grocery store. Through their Neighborhood Shares Program, the store donates 100% of products that go unsold but remain fit for our food recovery organization.

On a national scale, Trader Joe’s donated 85 million pounds of food in 2022. Valued at $411 million dollars, the brand clearly is an invaluable health partner in lots of local communities.

Trader Joe’s generosity got my attention as a volunteer food rescuer. This spoke to my curious marketing brain.

Differentiating the Brand in a Crowded Market – The Trader Joe’s way.

The retail grocery industry is a highly contested space with lots of competition and razor thin margins of 1% to 2%. Not only is differentiation important for growth, but it is also necessary for survival.

Here is how Trader Joe’s stands out:

• Product – Items that make it to Trader Joe’s store shelves are carefully tested and selected to fit their quality promise. Customers respond enthusiastically to the Trader Joe’s private-label items and the fact that the items are not available elsewhere creates a scarcity dynamic.
• Less is Better - Compared to their competition, Trader Joe’s only keeps about 4,000 products on the shelves compared to the 38,000 – 50,000 items carried by their competitors – Fewer choices means customers are not overwhelmed with so many selections. The science behind this approach is called the Paradox of Choice. More choices slow sales. Fewer choices enable more sales.
• Physical Environment – Trader Joe’s uses their store footprint as a competitive advantage. The store sizes are much smaller than competitors, and managers are empowered to decorate the space to reflect their local communities. The smaller environment is also used to achieve unmatched operational efficiency. Trader Joe’s earns roughly $1,750 of Sales Per Square Foot compared to $400 by its closest competitor.
• Price - Trader Joe’s deals directly with manufacturers and farms, eliminating the middle guys, to provide high quality products at lower prices.
• Promotion – The private-label products are a marketing advantage for the brand. Consumers are reminded of the brand every time they reach into their refrigerator and cabinets.
• Community – The Trader Joe’s customer base is intensely loyal to the brand. They belong to private social media groups where they exchange recipes for Trader Joe’s products and talk about their shopping experiences. Loyal customers act as brand ambassadors and that reduces the need for significant spending on traditional marketing activities.

Does Your Brand Stand Out or Blend In?

What makes a brand stand out from the pack? For some, it is the product mix and user journey. Others may achieve an advantage through the channel strategy and pricing.

Here are the things that are working for my clients:

• Strategy First – Leadership commitment to prioritize and to fund a focused effort to define the differentiation strategy. This is an assessment to determine baseline performance with respect to current market share, customer intelligence and competitive analysis.
• Identify Ideal Customers – Understand who are your most profitable customers. Commit to interviewing current customers to gather inputs for personas. Small business may have two to four personas. The personas inform your ideal customer profile and your customer journey map. This step is critical and if you do not have the in-house expertise to manage the task, I suggest you outsource the activity – it is that important!
• Search for Unmet Needs. Differentiation becomes possible when you identify specific unmet needs of customers. For example, the grocery industry is a highly contested space with lots of competition. At a certain level, all grocery stores fulfil customer’s basic need to access a wide range of food items. Trader Joe’s customers want high-quality food, at a low price, and they want to look forward to their shopping experience.
• Evaluate Your Competition – What problems are they solving? How are they differentiating? What is their messaging? What are their customers saying about them?
• Find Your Niche – The sweet spot in differentiation is finding an uncontested space and committing to creating a reputation for being the best at that distinction.
• Don’t take differentiation too far. Most customers don’t want to buy radically different products and services. Customers have specific needs. Products that deviate too far from their core need fall from consideration. Remember the customer rebellion when Coco-Cola reformulated its classic formula? That was distinction taken to the extreme, or a brilliant publicity campaign. I digress.

Summary

 Brand differentiation is important for business growth. If you are not already standing out in a crowded market, you are losing market share and profits. Fix your brand differentiation through a customer-centric strategy first approach.

Looking for additional business growth resources?

I created the Small Business Growth Assessment. It consists of 15 questions where you rate your organization on a scale of 1-5. You are welcome to use it to begin a conversation with your team.

David LaCombe is the founder of Imperatives Delivered a fractional chief marketing officer service for small businesses. He helps businesses grow by tailoring strategies and data driven solutions. David has extensive leadership experience in product development, marketing, sales, and user communities. Contact David to speak with him about your company’s growth imperative.