David Aaker, author, brand guru, Vice Chairman of the brand consulting firm Prophet, and professor emeritus at Berkeley’s business school, joins me for a provocative interview on the state of brands today.
Providing color and context for his latest book, Brand Relevance: Making Competitors Irrelevant, Dave explains:
- why the only way for brands to win is to create a new category or subcategory
- the difference between incremental vs. substantial vs. transformational innovation
- why researching your innovations with your target market is not enough
I have long admired Dave and, from the very beginning of my brand-building career, I’ve been deeply influenced by his thinking. It’s an honor to post this interview.
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Hello! I have been looking forward to this interview for over 20 years, literally. The man we’re going to talk to today has been informing and inspiring my thinking for that long. It’s David Aaker, the author, brand guru, vice chairman of the brand consulting firm, Profit, and also he’s professor emeritus at Berkley’s Business School. And David has published over 100 articles and dozens of books and his writing has deeply influenced many brand practitioners, including myself. You should see my copies of his first books Managing Brand Equity and Building Strong Brands, they’re so dog eared and underlined I think I need to get fresh copies. But, anyway, most recently, David wrote the book Brand Relevance, Making Competitors Irrelevant and so I’m pleased to welcome him here to talk about it and the state of brands today. So, welcome David.
David: Glad to be here.
Denise: Well I want my listeners to hear what Brand Relevance is all about but before we get into some of the books concepts, I want you to tell me why did you write this book?
David: Well, I just had come to the realization with all the market dynamics facing almost all marketers and brand owners, Brand Relevance basically explain almost all the dynamics. The astonishing fact is that with all the money and new product work that goes into most people’s business, it has almost no effect. And that’s because the momentum of a brand is just so powerful. And the habits of customers are so powerful that nothing changes. I did a study of the Japanese beer market and over 50 years there was only four changes in the market share trajectory, and three of those were when a new sub-category was created and the fourth was when a sub-category was re-positioned. So really the only way to make a difference is to make a new category or sub-category. And then winning is completely different, no longer are you winning by having your brand preferred over the other brand and no longer is the strategy to just promote my brand is better than your brand kind of marketing. But rather you win by making your competitors not relevant. So you’ve created a new sub-category that has some must have that competitors lack.
Denise: Wow. Well that sounds like a much more difficult task than simply developing yet another brand in an existing category. Yes?
David: Well, yes and no. The fact is that there’s been hundreds of examples that I’ve studied of people that have done it. So there’s a lot of role models, but it really requires a different thought process, a different kind of organization to do it. You have to be receptive to new ideas, you have to be able to bring them to market and you have to defend them afterwards by building barriers to competition. And you have to manage these new categories and sub-categories, so different orientation and different skills are involved. But there’s so many people that have done it like ESPN and CNN, in the broadcast area, and cars we have the Chrysler Minivan that went 18 years with no competition at all, none. They sold 12 million of those things and they had virtually no competition for that long. And in this beer market in Japan, I discovered Asahi Dry Beer went from a 9% share to take over a market leadership from a company that had owned 60% share for 25 years. So it can happen and when it does happened it’s just so disruptive to the marketplace.
Denise: Right. So can you walk us through, a little bit more, about establishing and maintaining brand relevance? What does that involve?
David: Well there is the other side of the coin. And the aggressive idea is to create an offering that is so innovative that it really creates some must haves and forms a new category or sub-category, like Chrysler did, like Enterprise Rent-a-car did, like Zappos.com did and like Whole Foods did, like Wheaties Fuel did. But the other side of the coin is that if you’re an established company, how can you defend yourself against these new market dynamics? And there’s two answers to that. One is you have to be sensitive to what customers are now buying and make sure that you are relevant to their purchase. And you can do that in a couple of ways. You can sort of reorient your whole business, like LL Bean did, they went from a hunting and fishing company to a camping and outdoor activity company, you can sort of gain parody with one of these must haves, like McDonald’s did with McCafe, they generated an offering that wasn’t as good as Starbucks but was good enough so that people no longer rejected McDonald’s as a place to go for breakfast or morning coffee. Or you can leapfrog like Cisco does time and time again. When they have a gap in their line they buy a company and they add it to Cisco’s offerings to create synergy and actually create something better. The other thing to guard against is energy because to be relevant you have to be considered as a viable option. You have to be credible and visible and that means you need to retain energy in your brand. And so you have to look for ways to keep your brand energetic and visible. And you do that either by energizing your business or finding something with energy and attaching your brand to it, something like Avon’s Walk for Breast Cancer or something. But whatever you do you’ve got to make sure your brand has some energy.
Denise: Now, in hearing you talk about some of these examples, I guess one person might say isn’t it a matter of degrees? What one person calls a new product someone else might call a new category or sub-category. So how are you defining what a new category or sub-category is? And how does it differ from simply a brand extension, for example?
David: That’s a great question and that’s the heart of the strategy. One of the most important strategic decisions a company can make is to distinguish between the kinds of innovation that they’re generating. There’s three kinds. There’s incremental innovation, which improves what you’ve got and helps you in this brand preference competition world. But then there’s substantial competition and transformational competition. Transformational innovation is kind of easy, it’s like Salesforce.com, they introduced cloud computing, it’s quite different. But the trick is to distinguish between substantial competition, that generates something that’s really must have, from incremental competition that’s generating something that you’d like to have. And it’s really important to make the distinction between the two, because as you pointed out if you have something that’s really incremental and you think it’s substantial and you think it’s formed a new sub-category, if you think it’s developed a must have, then you’re wasting a lot of money and time and resources. But on the other side of the coin, if you have something substantial and you assume it’s only incremental, you’ve wasted a huge opportunity.
The difficulty is that they target market isn’t always the best source of that kind of judgment. As Henry Ford famously said, “If you asked the customers, they’d say they want a faster horse” and Steve Jobs is quite proud that he’s never asked a customer anything. But having said that Steve Jobs has a great feel for the customer and the applications and the technology and what’s possible and so on, but he doesn’t get there by asking customers. So, yeah, you do ask customers but you have to be aware that they’re not real capable of judging things that are quite different. And the more different it is the harder it is for them to make a judgment. So you really have to have confidence in your judgment about the technology, about your firm, about the market trajectory, about the endurance of the trend as opposed to a fad. So, you do ask customers but you don’t rely on that.
Denise: Right. So your comments are reminding me of I had worked for many years at Sony Electronics, I was heading up their brand strategy group, and Akio Morita was famous for having said, “We don’t do market research, we don’t ask people what they want, we tell people what they want” and I think that that quote was often misunderstood that he didn’t care what consumers thought or felt but I think he was actually quite the opposite. He was actually quite the avid student of consumers lives and their lifestyles but it was also through observation and really getting, like you said, you just feel for the market and being able to interpret what he was seeing into the kinds of innovations that drove the company for so long. And so there’s definitely a role for understanding consumers but then, as you said, having a real keen judgment about what’s going on there as well.
David: Well that’s certainly true with Jobs and Henry Ford.
David: But if you look at, there’s so many, Ted Turner and CNN, he just knew instinctively a news network is going to be something that people want. And, of course, there’s a lot of sub-categories that you don’t need the customer research to know that people want low gas mileage, and so on. And so there are some things that are kind of obvious but you just need to be able to deliver it.
Denise: Right. So actually that brings me to one question. Is there a brand or a company that you observed that just can’t get it right? That they don’t have that feel for the market, that as you are observing them struggling to maintain their relevance? It’s kind of frustrating?
David: Well I think that one example is Sony. Sony was brilliant in the 70′s and 80′s and they kind of lost it. I tell the story in my blog about why did Apple generate the iPod and not Sony. In fact Sony introduced the iPod two years before Apple did but they introduced it in two versions. One that came out of the Vaio department, the other came out of the Walkman department and their third department, music Sony didn’t support either one of them. And they had the timing wrong, they had terrific silo problems, that when I wrote about in my Expanding Silo’s book and really Sony has missed everything in the last 20 years. They missed flat screen TV’s, they missed cellular phones, they missed the iPad, the iPhone, the iPod, I mean it’s incredible. That should have been Sony, it shouldn’t have been all these other companies.
Denise: Right. Now I share your frustration as well. Like I said having been there for so many years a brand that has so much potential and just not being able to get over a lot of the internal barriers, I think.
David: There’s terrible silo barriers.
Denise: Yeah. And I think that in listening to what you have said so far there’s definitely a different innovation capability that’s needed in these companies and that often is going to require new ways of working and breaking down the silos and, I guess, not only internally but also looking at suppliers and competitors and channel business partners as partners in innovation, so it’s a very different way of working in terms of breaking out and creating new categories. It requires that degree of different.
David: It requires some concept champion that has a really good idea. And you look at all these companies that have done it, Zara and Salesforce.com and Schwab One Source and Breyer’s Slow Churn Ice Cream, they all had a good idea and they had an organization that committed to it and they had somebody that could implement it.
Denise: Well, I think that that’s a great way for us to wrap up our conversation. I could talk with you forever about this but I really want to encourage people to learn more about your thinking and specifically about this concept of brand relevance by getting your book. And it’s called “Brand Relevance, Making Competitors Irrelevant”. I also, for my listeners, I encourage you to follow David on Twitter, his handle is DavidAaker, and also on his blog at davidaaker.com. He posts about once a week with great insights and perspectives about brand building that I know that everyone will get a lot out of. So, David, thank you so much for your time. Thank you for the many words of wisdom that you’ve shared through the years and I look forward to many more in the future.
(transcript by Speechpad)
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