In his new book, Brand Relevance: Making Competitors Irrelevant (John Wiley & Sons, January 2011), Haas Marketing Professor Emeritus David Aaker makes a distinction between brand preference and brand relevance competition to show firms how to succeed in dynamic markets.
Haas Research spoke with Aaker to learn more about his latest work on branding competition.
How do you distinguish brand preference and brand relevance competition?
In brand preference competition, the goal is to be superior to other brands in an established category. The focus is on incremental innovation: making it better, faster, cheaper. Brand relevance focuses on substantial or transformational innovation creating new categories and subcategories of products or services for which there is little or no competition. It’s a very different challenge.
Why should firms move in this direction to produce brand relevance?
Quantitative studies conclude that creating and managing new categories or subcategories is the way to attain above-average profits. As students learn in Econ 101, if a firm has no competition, there is less pressure on margins and less need to spend on marketing. One example is the Chrysler minivan, which enjoyed 16 years without a viable competitor and enormous profits as other automakers focused on other categories.
There is a clear advantage to becoming the early market leader for a new category or subcategory. The innovative brand can carry the “authentic” label, create a cadre of loyal customers, achieve scale economies, preempt the best strategies, get a head start on technology, and tailor the image of the category or subcategory so that would-be competitors don’t measure up.
Give some other examples of brand relevance winners.
Zappos.com, the Internet shoe company, established a category based on service and personality. Wheaties Fuel attracts people who want a cereal designed by athletes. Zipcar created the car-share category. Whole Foods Market defined a category around organic, natural food. The common denominator is changing what customers are buying with an offering that includes elements and associations that competitors lacked.
What separates the winners from the losers in brand relevance competition?
The key is to focus on building and owning the category and subcategory rather than the brand, a task that is foreign to brand and marketing strategists. Their familiar challenge is to position a brand with respect to an existing category or subcategory.
The focus should be on making sure that the category or subcategory has the right image, and that it includes elements that make competitors irrelevant. The Prius, for instance, created an image of quality, cutting-edge technology, and styling for the hybrid sedan category. SalesForce.com created a "cloud computing" category in which firms use software accessed from the Internet instead of in-house technology.
Salesforce emphasized the security and reliability of the new category and why it was better than conventional software delivery systems; the company did not argue that its brand was better than other brands.
You mentioned that brand relevance involves transformational innovation. What are the keys to such innovation?
Create an organization that will support innovation, that will simultaneously be opportunistic and able to commit and support new ventures with focus.
What about existing firms facing new categories?
Brand relevance is a threat as well as an opportunity to firms in dynamic markets. Even a leading brand can be overtaken by a competitor that has created a new category. It does not matter how well a firm produces a minivan if a customer is now buying a hybrid sedan.
In his new book, Brand Relevance: Making Competitors Irrelevant (John Wiley & Sons, January 2011), Haas Marketing Professor Emeritus David Aaker makes a distinction between brand preference and brand relevance competition to show firms how to succeed in dynamic markets. See the video.