Why does the era of AI demand brand strategy?

Lindsay Says

In every market, there are two places to win. Either you are the lowest-priced offering, or you are a differentiated offering. If you cannot price lowest, you have no choice but to be different. This is a law of economics.

AI enforces this law more ruthlessly than ever. Brand strategy is what earns you a place in one of the winning positions. It was always useful, and now AI makes it imperative.

The Two-Quadrant Rule: Where to Play

Picture a simple grid. Low price to premium price on the vertical axis. Undifferentiated to differentiated on the horizontal. The lower left belongs to the Amazons and Walmarts: low-priced, undifferentiated. The upper right belongs to every other thriving business in the market.

Anywhere else is no man's land. You cannot out-Amazon Amazon.

The pattern holds across markets. Here are a couple of examples:

Plot your own market and you will find the same pattern every time: the companies doing well are in one of those two quadrants, and the ones struggling are adrift somewhere in the middle. Unless your business has the lowest cost structure (a la Amazon), you must get to the upper right and keep earning your place there.

What AI Changes

AI enforces the two-quadrant rule on both ends.

It puts additional downward pressure on the lower-left quadrant because AI gives customers nearly perfect price information. Before the internet and AI, finding the lowest price required effort. You would have to drive around or call around to compare prices. The internet reduced that friction, and AI eliminates it almost entirely. If you are competing on price and you are not the business with the lowest cost structure in your category, AI will expose this.

What was less obvious to me until recently is what AI does to the upper right quadrant.

A specific promise is like a frequency. AI is extraordinarily good at finding the people already tuned to yours. The more precise your signal, the more efficiently it reaches them.

Zumiez, the streetwear retailer, has a fiercely differentiated brand, commands full price, and does not discount. AI finds Zumiez for the customer who wants exactly what Zumiez offers. As a result, Zumiez reaches more of their sweet spot customers, holds full price, and earns strong loyalty. All because they never waffle on what they stand for.

In contrast, Under Armour has not taken a stand. The brand has oscillated from performance to fashion to lifestyle, not committing to any of them. We can’t see the problem that Under Armour is solving. AI can’t spot it either.

AI is bad for businesses that prefer to hedge rather than choose their one distinctive promise. AI is excellent for those brave enough to make a specific choice.

Owning a differentiated position has always had economic value. AI has made that value higher.

Earning Your Place in the Upper Right: How to Win

Getting to the upper right is necessary. But where exactly is your place in the upper right?

Through brand strategy, you identify who you most want to serve, and the problem you promise to solve for them. It takes bravery. The more vague your promise, the more you slide toward the middle.

You cannot hedge your way to the upper right. The more precise, ownable, and compelling your promise, the higher your customer’s willingness to pay. The higher their willingness to pay, the stronger your profit margins, the more you can reinvest in what makes you different. The more you do that, the sturdier your competitive moat.

That promise becomes your North Star. You’ll use it to guide every decision.

What This Means for You

If you are not the Amazon of your category, and most of us are not, you need to be in the upper right.

What do you do that is different from everyone else in your market? Specific enough that AI could surface it? Compelling enough that a customer would pay more for it? This is your brand strategy.

Find that thing. Commit to it. Let it become your North Star for every decision: what to build, what not to build, who to serve, how to talk to them. AI will reward your boldness and precision.