Net Benefit Focuses Brands On Sources Of Value

Martin BishopSeptember 1, 20152 min

It takes some combination of time, effort, creativity and money for brands to successfully differentiate themselves from the competition — something brilliant in terms of functionality, design or marketing for a brand to stand out from the crowd.

Differentiation is worth striving for. Differentiated products command loyalty and a price premium. Some products are so differentiated, people will wait all day and all night just to get a hold of them.

But it’s not about differentiation at all costs. The question is whether consumers will pay enough for all your brilliance and investment? Can you drive enough money from your differentiation to cover your costs? As Michael Porter says in his book: Competitive Advantage: “Differentiation leads to superior performance if the price premium achieved exceeds any added costs of being unique.” It’s the net benefit that counts.

In the sometimes tangled world of brand architecture, marketers can apply the principle of net benefit to resolve key questions. Often brand architecture comes down to a trade-off between focus and efficiency. Should we maintain our portfolio of brands that allows us to really focus on key product categories/consumer groups or should we consolidate our portfolio, sacrifice some of our focus but save money?

In a typical scenario, a business will have grown organically or by acquisition and have 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?

Net benefit creates a bias towards simplification and puts the focus on sources of value. Often it turns out that less is more, even when portfolios are made up of well-known brands. The same applies to branded features—while each feature may provide some source of value and differentiation, there’s not enough marketing money for consumer attention to support every feature that could be branded. The net benefit principle helps evaluate which features (if any) deserve branding status.

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