Your brand has been chugging along and meeting all KPIs, hitting all targets and just killing the game in general. Perhaps you’ve been pondering your next move but can’t decide exactly what that move should be. Maybe you’re feeling the need to branch out and expand but aren’t sure how. Well, we have good news: You might be a good candidate for brand differentiation!

What Is Brand Differentiation?

Brand differentiation, also known as sub-branding, occurs when a parent company creates a separate brand for a similar product. Some parent and subsidiary brands are directly connected, but others may have a loose association or none at all. A good example of this is Coca-Cola, which maintains the classic Coke brand while also supporting their directly related brands like Coke Zero, Cherry Coke and many more. At the same time, Coca-Cola also manages brands that have nothing to do with their original product, like Dasani, Powerade and Fanta.

Why Utilize Brand Differentiation?

Obviously, Coca-Cola is a very successful brand, and their use of brand differentiation is a lucrative strategy for them. But sub-branding is risky if it’s not done for the right reasons. This can lead to brand fragmentation, where a lack of cohesive vision dilutes the parent brand and overwhelms or confuses consumers, causing them to peel off from your base. However, if you have the right reasons, you’ll be in the clear and reap the benefits of this strategy. 

So, what are those reasons?

1. You want to market to different retailers.

Major retailers often have strict guidelines for the brands they carry. Some offer store brands that allow outside brands to market their product under the retailer’s sponsorship. This allows brands to build and scale without spending extra on advertising. You also have a somewhat captive audience in the retailer’s established customer base. Walmart’s Hyper Tough (HT) brand is a great example of this: They allow many other manufacturers to brand their product under the same HT brand, boosting sales and visibility for all

2. You want to create a distinct brand with a different positioning or price point.

Your original brand is a known quantity: You know what need it fulfills, and where its marketing positioning stands. This gives you a good understanding of your competitors and an understanding of any holes or untapped needs that you could leverage. This is the perfect opportunity to create a premium brand or value brand relative to your product.

Did you know that the Toyota Motor Corporation also owns the Lexus brand? Toyota’s branding tells consumers that theirs is a value brand with a reasonable price for a good product. On the other hand, Lexus is marketed as a luxury brand and priced accordingly. Even though the cars both share the same model platform, their brand differentiation allows Toyota to target different consumers with different wants and needs.

3. You want to leverage existing market domination.

If your product has a unique connection with consumers that transcends – or even defines – the market space it inhabits, brand differentiation can fully allow your sub-brand to spread its wings and gain further market share. Think about Post-it Notes. They’re fun, they’re colorful and their name defines the genre: We don’t call them sticky notes, they’re commonly called Post-it Notes no matter the actual brand. If their parent company 3M’s logo wasn’t on the back, you’d probably think that they were an independently produced brand. Because 3M stepped back and let Post-its be their own thing, it enriched both brands. 

4. You want to seek authenticity and connect with your customers.

At the end of the day, consumers don’t connect with faceless corporations. They connect with stories and ideas. If you’re thinking of sub-branding a unique product, a different approach focusing on a more personalized marketing strategy will help you make deep connections and find a space in your consumers’ hearts – and their carts, too.

Take Buzzfeed, the online culture aggregator and content creator. In 2016, they launched a sub-brand called Pero Like, staffed with Latino content creators, to create content that catered specifically to Hispanic consumers, one of the largest-growing demographics in the United States. They’re also one of the biggest consumers of media and tend to use their mobile devices to access content more frequently than other groups – and accordingly, consume more ads. Buzzfeed saw an opportunity to connect with this growing demographic on a more personal level and seized it.

5. You want to spin off and compete in a new space.

It’s the final frontier! If you want to connect with similar or new consumers with different needs, brand differentiation can work to your advantage. Perhaps your brand is targeted at a particular demographic, and your initial customers are aging out of this demographic and into a new one with different consumer needs. To continue your revenue stream from them (and pave the way for new customers to follow the same path), you can craft a sub-brand that can meet customers’ current needs while still leaning on the name recognition and nostalgia they have from their initial interaction with your brand.

Brand Differentiation Increases Opportunities for Your Parent Company

Brand differentiation creates an opportunity to expand your brand’s horizons by connecting with new markets, different customers and higher profits. As we’ve mentioned before, there are a few pitfalls that make the road to brand differentiation difficult to navigate. However, with the right reasons and a clear vision on your side, you will be well prepared for the journey.

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