David A. Aaker: An interview by Bob Morris

Posted on: July 3rd, 2011 by bobmorris

In his own words:

“My passion is understanding brands and helping firms build brands and brand portfolios. My first brand book, Managing Brand Equity defined brand equity and set forth its value to a firm and its customers. The second, Building Strong Brands, described the “brand identity” model that many firms use to manage their brands and also introduced the Brand Equity Ten measurement structure. The third, Brand Leadership, extended the brand identity model and adding material on brand building programs. The fourth, Brand Portfolio Strategy, introduces models and concepts that allow a firm to sort out the complexities of brand portfolios and the priorities and relationships that define them. The fifth, Spanning Silos presents research showing the problems that product and country silos organizations pose to those who would build brands and create effective marketing and what some firms have done to create cooperation and communication to break down the silo barriers.

“My latest book, not counting my autobiography, is Brand Relevance: Making Competitors Irrelevant that shows success in dynamic markets involves creating offerings so innovative that they create new categories or subcategories making competitors irrelevant.

“I am a part of Prophet, a global brand and marketing consulting company that is on the forefront of branding issues, professor emeritus of the Haas School at UC Berkeley, and an advisor to Denstu. I live in Orinda, California near my three daughters and seven grandchildren and try to do a lot of biking and just enough golfing.”  My biography “From Fargo to the World of Brands,” elaborates.

Morris: Before discussing Brand Relevance, a few general questions. At one time, marketing was defined as a process by which to create or increase demand. To what extent is that still true?

Aaker: It is still true and good message for those that think that marketing is selling and that brands are logos.  Marketing over the last few decades has struggled with some success to be perceived as strategic and to have a place at the executive table.

Morris: Obviously, “going to market” has certainly become much more complicated in recent years. Of all the changes that have occurred, which do you consider to be the most significant? Why?

Aaker: One is the importance of brand equity and the brand portfolio as a foundation for business strategy and strategic options.  Another is the proliferation of media including social media that has made brand building more complex and introduced new ways of relating to customers.

Morris: Which business thinker has had the greatest influence on your own thoughts about marketing? How so?

Aaker: In one of my blog postings on davidaaker.com I note the three books that influenced me the most.  The one at the top was Peter Drucker’s Managing for Results–among other things he talks about critical result areas and categorizing businesses as tomorrow breadwinners, today’s breadwinners, among several other categories.  Drucker was the most influential business management writer in the last century to me.  The other authors were Ted Leavitt and Alfred Sloan.

Morris: In your opinion, which company has sustained the most effective marketing initiatives, year-after-year, and how do you explain its success?

Aaker: Apple has created a new subcategory at least five times in the last decade.  The reason is Steve Jobs, who, in my mind, is the top CEO of our time.

Morris: Years ago during dinner in San Francisco, I asked a venture capitalist how he decided which funding proposals to focus on among the hundreds that arrived on his desk each month. “I always ask three questions: Who are you? What do you do? And then the ‘killer question,’ Why should I care?”

My own opinion is that these are questions that all marketers must ask and then answer, especially the third one. What do you think?

Aaker: I like to pose the following two questions to employees of a firm.  “What does the brand stand for?” and  “Do you care?”  If the answer is not positive to both questions, brand building will be difficult.  With respect to customers I would want to know if they know anything about the brand, why they would buy it if purchasing something in a particular category, and if they would recommend it.

Morris: When and why did you found your firm, Prophet? Also, please explain its name.

Aaker: Prophet was formed in 1990 by two Haas graduates.  I and Michael Dunn, its CEO, joined in 1999 when it had 18 employees and local clients.  It now has nearly 200 employees and offices around the world

Morris: To what extent (if any) has its mission changed since then?

Aaker: It has expanded from a base in brand and brand portfolio strategy to now include innovation, design, analytics, and social media strategies.

Morris: What do you know now about business that you wish you knew then?

Aaker: Michael and a terrific team run Prophet, I am the guru in the corner.  But in watching their progress, I am struck by how many dimensions have to be right, offering development, offering delivery, staff hiring, staff evaluation and motivation, staff retention, culture, finance, accounting, country specific issues and more.

Morris: I was astonished, frankly, to learn that Coca-Cola had 22.5 million visitors on Facebook last month in contrast with only 270,000 to its website…more than 80 times as much traffic. How do you explain this?

Aaker: I think it is a choice that most companies need to make, based on what they are attempting to accomplish. Coke drives people to its Facebook page because so many are on Facebook.  But many other brands like Pampers, General Mills, or Harley have the website as the centerpiece.

Morris: In your opinion, what will be the single greatest business opportunity within (let’s say) the next 3-5 years. Please explain.

Aaker: To create offerings so innovative that they create new categories or subcategories.  The future of winners will be about innovation and growth.  Innovation is not easy.  It is not just brainstorming. It is creating the right organizational culture, processes, and people.

Morris: However different they may be in most other respects, what do all great brand management programs share in common?

Aaker: They all have a future vision that will support current and future strategies.  This vision will be operational in that it will have enough specificity and inspiration to guide the development of band building and marketing programs.  It will also be general enough so that relevant and contemporary programs can live.

Morris: To those who head local family-owned franchises of national chains, what are the most important lessons to be learned about marketing in general and brand management in particular?

Aaker: Most family owned business will have a strong heritage and culture that trace back to the origins of the firm.  The brand and operations should reinforce and build on that heritage and culture.

Morris: Now please shift your attention to Brand Relevance. Up front, I want to say that I think it is the most interesting as well as the most valuable book you have written…thus far. When and why did you decide to write it?

Aaker: I wrote a chapter in by Brand Portfolio Strategy book in 2004 and since then have been amazed to realize that almost all marketing dynamics can be explained by brand relevance because they involve the emergence of new categories and subcategories and the fading of others making some brands not relevant or less relevant.  I did a study of the Japanese beer market over 50 years and found that market share trajectories changed only four times, three involved a new subcategory and the fourth a subcategory reposition.  Most categories have similar stories.

Morris: Please explain what brand relevance means.

To be relevant to a category or subcategory a brand needs to have the credibility and visibility to be considered.  In my view strategy is about gaining or keeping relevance and making competitors irrelevant.

Morris: Can you elaborate on the difference between brand preference and brand relevance competition?

In brand preference competition, the goal is to be superior to other brands in an established category.  The strategy is to employ an array of marketing programs and to achieve  incremental innovation—make it better, faster, cheaper.  It is all about “my brand is better than your brand.”  The outcome is inferior growth and profitability.

In brand relevance competition the goal is to form new categories or subcategories through substantial or transformational innovation.   Marketing has a very different role—to actively manage the perceptions of and preferences toward the new category or subcategory.  This, with rare exceptions, is the only way to growth.

Morris: To what extent (if any) does this book develop in much greater depth concepts and insights you introduced in any previous books?

Aaker: This book has the same style as my first four brand books.  Concepts are hopefully rigorous, conceptual models guide, case studies illustrate and bring alive ideas, and academic research is accessed where it is helpful.

Morris: You provide 25 case studies. By what process and according to which criteria did you select the exemplary companies?

Aaker: Mainly coverage. I wanted cases that covered concepts and lessons and involved different business types–durables, consumer packaged goods, services, and B2B.

Morris: What differentiates your book from others in which their authors also discuss growth strategies based on innovation?

Aaker: First, while other treatments focus on categories and transformational innovation such as that of Cirque du Soleil, these ideas apply to subcategories and substantial innovation such as energy bars for women.  As a result, there are many more opportunities to apply the ideas.  Second, the idea that perceptions of the new category or subcategory need to be actively managed is here emphasized.  They are not assumed to be fixed by the marketplace.  Third, other efforts virtually ignore the brand yet that is usually central to developing and especially owning a new category or subcategory.  Fourth, the concept of creating barriers to competitors and the several barrier types is otherwise neglected.

Morris: What are the nature and extent of “the brand relevance war”? How best to wage and win it?

Aaker: The best way is to create innovative offerings that define new categories or subcategories.  That involves finding and evaluating the right concept and having an organization that will support.  For success tow addition elements are critical.  First, to become the exemplar or representative of the category or subcategory and actively manage the perceptions, behavior, and loyalty toward it (as opposed as toward the brand).  Second to build barriers to competitors

Morris: How specifically do categorizing, framing, consideration, and measurement help to understand brand relevance?

Aaker: A category or subcategory will be defined by one or more “must haves” that are introduced into the market.  The literature on categorizing is helpful to understand the process.  It turns out that categories can be defined by characteristics or by exemplars and research has shed light on both.  The framing literature tells us that the way a category or subcategory is framed can affect the way it is perceived.  Relevance is by definition being considered so the literature on consideration sets is helpful.  Measures help make concepts specific.  So relevance is not what categories or subcategories are associated with a brand but what brands are associated with categories or subcategories.

Morris: What lessons about doing that can be learned about changing the retail landscape from companies such as IKEA, Best Buy, Whole Foods Market, and Zappos?

Aaker: First, when a retailer can create a new category or subcategory and own it, growth can be incredible but a “me to” retailer will struggle.  Second, in the retail space service and customer interaction is critical so most success stories involve brands with strong cultures that are customer facing and have the people, processes, and culture to deliver.  All of these four brands have done that for sure.

Morris: For those who have not as yet read the book, what is the Brand Relevance Model? By what step-by-step process should it be used to “change what people buy by creating new categories or subcategories that alter the ways they look at the purchase decision and user experience”?

Aaker: There are four key tasks that will be a part of every successful effort to create a new category or subcategory—concept generation, concept evaluation, defining and management the category or subcategory, and creating barriers to competition.  Each of these is not automatically part of any marketing or branding effort and may require resources and organizational change.

Morris: What are the defining characteristics of a new category and a new subcategory?

Aaker: A category or subcategory an offering defined by some “must have” which could involve characteristics beyond attributes or benefits such as a certain personality, organizational values, social programs, self-expressive benefits, or community benefits.

Morris: How to find new concepts and what can be learned from how Apple does that so well?

Aaker: The book discusses some fourteen different sources such as unintended applications, non-customers, technology, unmet needs, market trends, and more.  It turns out that asking customers does not often work because customers are too influenced by the current offerings.  Jobs at Apple famously does no customer research per se.  However, Apple has a great feel for the technology, for the market, and his own firm’s skills.  The unappreciated genius of Jobs is his great sense of timing.  Although Apple was not the first with the iPod, the iPhone, or the iPad, in each case the timing was perfect, the technology, the market, and the firm were in place.

Morris: What is ethnographic research and why can it be so valuable?

Aaker: Ethnographic research involves living with customers and observing and interacting with them in a way to learn of unmet needs and gaps in the products they use.  P&G has popularized it by systematizing the process and involving many in their organization.  For example, P&G developed Magic Reach, a device with a long handle and swivel head, after watch people being frustrated in cleaning of the bathroom.  And P&G’s Downey Single Rinse came out of aclose0up view of the water availability problem in rural Mexico.

Morris: What lessons can be learned from Segway’s human transporter? Are these lessons relevant to almost any organization, whatever its size and nature may be?

Aaker: That firms have to get everything right most is not good enough.  The product worked perfectly, was produced without quality problems, and the introduction garnered more publicity that any other, the product was on the cover of major magazines and the subject of major TV shows—you could not buy the visibility with any amount of money.  But they had a flawed concept of the target market and a inadequate distribution model.

Morris: What is “Rosy Picture Bias”? How and why can it create serious problems?

Aaker: Some projects that are incorrectly perceived to have a “must have” and will create a new category or subcategory when in fact the innovation is incremental.  The culprit often is the rosy picture bias. One reason is psychological.  The innovation champion, having selling the innovation for a long time, is no longer objective about its merits.   Another reason is professional, the innovation may be a closely associated with the career or of a person or group inside the organization. A third reason may be organizational momentum.  Because of the rosy picture bias, there needs to be a regular process that is objective, data based, and involves neutral people.

Morris: What is “Gloomy Picture Bias”? How and why can it create serious problems?

Aaker: The decision to kill a project that could lead to the creation of a new category or subcategory in which the firm could hold an ongoing advantage can be disastrous and is often influenced by a gloomy picture bias.   It is often caused by pessimism about needed technology advances (GM killed the battery operated car in 1998), market size estimates colored by existing flawed products (e-readers before Kindle were not selling), a belief that offering limitations cannot be overcome (a personal finance company overcome beliefs that people would not input personal information), and the right application is not identified (Intel did not realize at first that computers would be a big market for the microprocessor).

Morris: How best to create barriers to protect categories and subcategories?

Aaker: Barriers need to be created or the benefits of winning the brand relevance battle will be short-lived.  There are four barriers types.  One is investment barriers that can involve technology, execution capability, brand equity or brand networks.  Another is to engage in ongoing innovation to become moving target.  A through is a rich customer relationship base on involving the customer, giving the brand a personality, and energizing the brand.  Finally, the brand can become the exemplar, the authentic representative of the new category or subcategory.

Morris: How to avoid a loss of relevance? What are the early-warning signs indicating that a process of erosion has begun?

Aaker: There are two types of relevance threats.  The first is when customers start buying another category or subcategory.  It does not matter how good your minivan is if people what a hybrid sedan.  To avoid this type, you need to make an honest appraisal of the market trends.  The second is when your brand lacks energy and visibility and is not longer considered.  Every brand needs to inject energy into its relationship with customers.

Morris: What is the role of a branded social program and how can you design one that delivers?

Aaker: The point of a branded social program is to provide a win-win situation by making a difference with respect to an important social problem in a way that enhances the brand and builds a stronger and deeper customer relationships, and inspires employee who can realize that they are about more than sales and profits.  The guiding principles include leveraging firm assets and values, be authentic, create an emotional connection, involve the customer, and communicate the program.  Avon’s Walk for Breast Cancer is a good role model

Morris: What is a “branded energizer”? How to create one? How to sustain (if not increase) its power?

Aaker: A relevance challenge is to inject energy into a brand.  That can be done by energizing the business with new products or marketing or to find something with energy and attach it to the brand.  A branded energizer is a branded product, promotion, sponsorship, symbol, programs or other entity that by association significantly enhances and energizes a target brands.  Examples include Ronald McDonald House and the Habitat for Humanity’s link to How Depot.

Morris: In Chapter 11, you provide a rigorous examination of “the innovative organization.” Here’s a two-part question: What are its defining characteristics, and, can almost any organization become one?

Aaker: The innovative organization needs to have three conflicting characteristics.  It needs to be selectively opportunistic which means to be entrepreneurial, agle, and open to exploit strategic opportunities.  Second, it needs to be able to have dynamic strategy commitment.  Offerings based on substantial or transformational innovation will have difficulties and barriers and commitment is needed to overcome these.  Third, it needs to have a centralized resource allocation process so that embryonic businesses will get the need resources, not easy to implement in a siloed world.

Morris: What are the “yin” and “yang” of “the relevance battle”? What is the special significance of each?

Aaker: In the last chapter I point out that the creation of a new category or subcategory (the yin) is powerful and can meaningfully exert growth and vitality into a brand and business.  However, it is not easy and there are a host of barriers and pitfalls (the yang) and executives need to know about these in order to deal with them.  A failure can be caused by a misjudgment with respect to evaluation, organizational commitment, implementation, market acceptance, barriers and more.

Morris: Many of the authors I have interviewed said that they learned a great deal while writing their book that they did not know before. Did that also occur to you while writing Brand Relevance?

Aaker: My prime motivation is to influence firms to understand the value of building assets instead of focusing on short-term financials and, in particular, learn the value of brand equities and how to build them.  Along the way I often need to find, create, and organize a body of knowledge for sure, a process that I enjoy.

Morris: Which question had you hoped to be asked during this interview – but weren’t – and what is your response to it?

Aaker: Here’s a candidate: “Innovation plays an important role in the relevance theory. How many ways can a company innovate?”

Here’s my response: Incremental innovation supports brand preference competition, making an offering better or cheaper.  Substantial or transformational innovation, on the other hand, as the potential to create new categories or subcategories that will result in a future growth platform.  A key is to distinguish between incremental and substantial innovation.

*     *     *

David Aaker cordially invites you to check out the resources at these websites:

http://www.davidaaker.com

http://www.prophet.com/about/leadership/aaker

http://www2.haas.berkeley.edu/faculty/aaker_david.aspx

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