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Warren Buffet on Economic Moats and Brand Differentiation

How is your company/brand/product truly different from the competition?

Matthew Cochrane talks about Buffet, brands and moats? Read on:

How is your brand truly different from the competition?

In today’s world, it is hard to distinguish your company’s products and services from a crowded field of rivals. To truly differentiate your company from the competition you will need at least one economic moat. An economic moat is something your company can do better than anybody else. It is a competitive advantage that will keep competitors at bay.

The concept of an economic moat is not new. Warren Buffett, one of the greatest investors who ever lived, says a company’s moat is one of the first characteristics he looks for when considering a business as a potential investment.

In medieval times, land disputes between warring factions were fairly common. To protect themselves from invading armies, villages and castles would build a moat around the castle or town that needed protecting. A moat is a wide, deep ditch often filled with water. This was one of the most of effective defensive measures towns could employ against advancing enemy forces.

In the same way, Buffett explains, companies can build economic moats around their business to protect themselves from the competition. Buffett says, “In business, I look for economic castles protected by unbreachable moats.” These moats can represent a number of advantages. One of the most devastatingly effective moats that Buffett likes to see in a potential investment is brand power.

Looking for companies with real brand power has been one of Buffett’s secrets to his investing success. Consider Coca-Cola, a company Buffett first invested in decades ago. Warren Buffett has said, “Give me $10 billion dollars and how much can I hurt Coca-Cola around the world? I can’t do it.” Why? Because Coca-Cola makes better sugary, carbonated beverages than anyone else? Not really. It’s because they have successfully built up one of the most recognized brands the world has ever seen.

Building brand power is not easy.

For starters, it takes time and a consistently great product or service to build up a high level of trust with customers. Customers want to know exactly what they’re going to get every single time they make a purchase. One disappointing experience with a product can erase years of good will.

It also takes a special type of marketing savvy to know how to sell your product or service in a way that will have customers associate your brand with high quality, good value, and integrity.

Please contact us for assistance in how to make your company’s brand a “unbreachable moat”.

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