Brand Mix

It takes time, effort, creativity and money for brands to successfully differentiate themselves from the competition. It takes brilliance in innovation or design or advertising creativity or customer service or a combination of these and other factors to develop a brand that stands out from the crowd.

All this effort has its reward. Differentiation translates into products and services that are worth more to people. They will pay more for them and be more loyal to them. If the products are really differentiated, people may even queue all night for them.

But will consumers pay enough for all the brilliance and hard work? Can you drive enough revenue from your sources of differentiation to cover the cost of the resources required to create them?

This was a key principle expressed by Michael Porter in his book: Competitive Advantage, celebrating its 25th anniversary this year. As Porter says: "Differentiation leads to superior performance if the price premium achieved exceeds any added costs of being unique." It's the net benefit that counts.

This way of thinking comes in handy when considering brand architecture. In a typical scenario, we will be working with a business that has grown organically or by acquisition and has more brands in its portfolio than it can manage or support. The principle of net benefit provides a framework for evaluating the portfolio. Which brands are pulling their weight? Which are not? Could a streamlined portfolio widen the gap between differentiated-driven revenue and costs? Often it turns out that less is more, even when portfolios are made up of well-known brands.

And that's the beauty of this net benefit principle. It creates a bias towards simplification and puts the focus on sources of value. There are many ways to differentiate. The net benefit principle can help you evaluate which of all those ways is the most effective.

Photo: and sometimes I have to do it all in COLOR by Robert S Donovan on Flickr