Buzludzha, Bulgaria

Less is sometimes more. This is one concept new business owners have a hard time accepting. Oftentimes when I consult a new client, they try to be all things for all people and I need to explain why this is a terrible idea and the fastest way to fail.

Offering whatever you can to as many people as you can seems like common sense, doesn’t it? You should sell more and make more money. It’s basically math, right? What could possibly go wrong?

Being all things to all people.

Being all things to all people means you have no identity. What you’re offering isn’t clear. Moreover, whom you’re offering it to isn’t clear. This creates confusion in the minds of your potential customers. And there are few things more devastating to your business than creating confusion.

This is where brand strategy comes in. A good brand strategy allows you to make things clear. Who is your target market? Why is that your target market? What makes you different from your competitors and why should anyone care? Your brand strategy allows you to answer all these questions (and many more). It allows you to differentiate from your competitors, specialize into what you do, and get your brand name out there.

When to specialize.

In the beginning, it’s a good idea to specialize. Find your footing and get comfortable where you are. Identify your target market and show them how you can solve their problems. Pay attention to the customer and create a loyal customer base.

At this stage, you’re fighting for survival. Every little advantage you give yourself can be the difference between keeping the lights on and closing shop for good.

I know that’s not what you want to hear. I know it’s a long and arduous process. But it’s the way your business stands the best chance.

Specialization allows you to create a new category where you can dominate. It allows you create something more than an OK business. This is a lot more sustainable than hoping you can outspend the competition on Facebook ads. Because the moment someone with a bigger wallet shows up, you’re toast.

When you specialize, your customers know what to expect from your business. This lowers the risk and makes their decision easy. If your message is clear and your value proposition – obvious, then generating business doesn’t feel like pulling teeth.

It’s usually at this point in the discussion when a client brings up Amazon, Samsung, Apple, and other global “generalist” brands. To which I reply, “You can afford to be a generalist when you have their budgets.”

When to generalize.

Once you’ve established a successful business and you’ve dominated a category, now you can set your sights on expanding. But bear in mind, expansion doesn’t automatically equal success. In fact, it can be very risky.

It takes a lot of time for a brand to build the trust it needs where it can comfortably start diversifying. Even so, expansion into new markets should be a slow, strategic, and well-researched process. Once you have the budget, the manpower, the expertise, and brand trust, it’s a helluva lot easier to introduce new products or services.

But even then you risk alienating your current customers. And it’s not always obvious you will find new ones at the end of the tunnel. So don’t just look at Apple and Amazon and think you can easily achieve what they have. It took them decades to get to where they are.

It’s also worth to remember Microsoft have had a hard time breaking into new markets. Despite their vast resources, they just can’t cut a break. Remember the Zune? Yeah, neither do I. And which Microsoft phone is going toe to toe with the iPhone? Exactly, none. And finally, even the Surface, which is relatively successful, has only a fraction of the iPad sales. Despite their ginormous ad budget. All of this, while Sony have been kicking their asses on the console market for two generations now. And if the PlayStation 5 demos are any indication – the trend will continue.

My point is, generalizing once you have success in one area is not a done deal. If a corporate behemoth like Microsoft is struggling with it, what makes you so sure you won’t?

It’s hard enough to establish one brand people care about. Once you’ve gained your customers’ trust, then you can try to offer them something new. And you better make sure it’s the quality they expect or better. Because trust is easy to lose. Let’s see how you can go about it.

House of brands or a branded house?

When they start to expand and generalize, brands go somewhere on the spectrum between a house of brands and a branded house. Both these models have their pros and cons. I’ll cover them below so you know your options if you decide you’ve outgrown your current market.

Branded house

A branded house would be something like FedEx or General Motors. Branded houses offer different products or services, but they’re all under the same brand.

The good thing about this is the brand is already established and (hopefully) carries some good will with consumers. They already know and trust the brand.

However, this also makes it more difficult to offer them new products and services. They’ve already categorized your business in some way, so they would be expecting goods and services close to your initial positioning. That’s why FedEx can’t start selling smartphones, all of a sudden.

A branded house can be great when you’re expanding into categories that are close to your original business. This is the best way to leverage the power of the brand. Otherwise, a hybrid approach or a house of brands might be more appropriate.

House of brands

No, this is not a new Netflix show. House of brands is more or less the opposite model of the branded house. One company owns many different brands. In most cases, the end consumer isn’t even aware of the company behind their chosen product.

An example would be Procter & Gamble. They own many consumer brands. Odds are, you have P&G products in your house right now and may not even realize it. This is the power of the house of brands.

A house of brands allows you to develop different brands under the same roof. They have access to the same resources, but they’re separate businesses. This makes it easy for a company to offer diapers and electronics at the same time. Since they’re different brands, there is no confusion.

However, this also requires lots of resources. Each individual brand needs to have a separate brand strategy and win over their target market. Clear messaging and great management are crucial for a house of brands, since every brand needs to stand on its own feet.

Conclusion

As you can see, it’s possible to generalize but it’s not easy. And it’s certainly not the first thing you want to do. Especially if you’re a small business or just starting out, think about establishing a brand first. Specialize. Once you’re big enough to diversify, then you can think about expanding, but not a moment sooner. Otherwise you might kill your business.

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