David Aaker

Modern Branding: Its Emergence 25 Years
Ago—and Its Future

Haas’ marketing maestro reflects on past and future branding trends on the occasion of his induction into the Marketing Hall of Fame.

By David Aaker
Vice Chairman, Prophet
Haas Professor Emeritus

On a rainy Friday morning in May 1931, Neil McElroy, a 26-year-old advertising manager, wrote a three-page memo telling why he wanted to hire two people to help manage the Camay soap brand at Procter & Gamble (P&G). An aside, he wrote three pages despite an ironclad rule that all memos had to be under one page. He went on to success as CEO of P&G and later as secretary of defense under Eisenhower. But his most lasting contribution is undoubtedly his “Brand Man” memo which defined the P&G brand management system that was to be the dominant paradigm for many companies around the world for a half century and more.

Fast forward to the year 1990, a year that was in the middle of a host of changes to brand management.

First, the country or product fiefdoms were starting to break down in the 1980s. The brand was no longer considered to involve one product and one country like it was in the days of McElroy’s memo. Nestlé, P&G, and others were using roles like Brand Champion or Global Brand Manager to coordinate the brand vision and marketing programs across countries and products. In 1993, Lou Gerstner famously reduced the number of agencies at IBM from 40 to one, making country and/or product isolation no longer the dominant organizational structure at IBM. Other firms were making moves in the same direction.

Second, the 1980s also saw the decline of the one-brand focus as it was in the McElroy model to a broader concern with managing a group or family of brands across multiple products. In 1987 P&G, for example, instituted category management which meant that groups of brands around a common function like hair care were managed as a brand team. Many firms evolved toward some form of central oversight of resource allocation across brands and finding ways that brands could work together. The McElroy concept that brands within a firm would engage in healthy competition was starting to fade.

Third, the concept of “brand is an asset” that is measured by its brand equity emerged in the late 1980s. It was driven in part by overuse of promotions stimulated by scanner data and the need to move from cost reduction to demand generation. Treating brands as an asset changed everything for those firms that bought into it. It changed what marketing does and who does marketing.

“Firms need the will and capability to manage subcategories rather than brands, to make sure that their subcategory wins and that it evolves so it keeps winning.”

Brand management now included strategic decisions as well as tactical ones. In the McElroy model, the process involved identifying sales weaknesses and “fixing” them with advertising, promotion, or distribution programs, all tactical programs. When the “brand is an asset” perspective is adopted, brand equity becomes an important objective, and because brand equity enables business strategy, marketing becomes a part of the strategic discussion. What becomes clear is that marketing has a lot to bring to the strategy table because of ownership of concepts like customer insights, segmentation, and value propositions, all at the very heart of strategy choice.

Who does marketing also changes. When brand equity is accepted as a driver of strategy, marketing and brand management become part of the charge of the executive team and are no longer relegated to middle management. And for the first time, marketing gets a seat at the executive table in the form of a CMO or VP of marketing.

Fast forward to today. I see the future as an acceleration of three branding trends that are affecting nearly every business. The winners of tomorrow are going to be riding these waves rather than swimming against them.

First, there is a trend from “my brand is better than your brand” marketing to subcategory competition driven by the fast pace of innovation in the marketplace and a growing recognition that, with some exceptions, meaningful brand growth spurts are caused by a new “must have” defining a new subcategory for which competitors are not relevant.

2015-MHOF-045

Prof. Emeritus David Aaker speaking at his induction into the New York American Marketing Association’s 2015 Marketing Hall of Fame. Aaker was selected for his outstanding lifetime contributions to the field, which include developing the Aaker Model, a brand identity tool used by hundreds of firms to build and strategically manage brands.

The evidence that subcategory competition is driving growth is abundant. For me, the insight started with my analysis of some 40 years of Japanese beer data. During that time, there were only four major changes in market share trajectory. Three of these were caused by new subcategories being formed or solidified: Dry Beer, Ichiban, and Happoshu. The fourth was when two subcategories, dry and lager, were simultaneously repositioned. I have found the same pattern in dozens of categories such as cars, financial services, computers, retail concepts, water, airplanes, and many more. Growth, with rare exceptions, comes only when new subcategories are formed. In the automobile space, for example, we know that was true for the Chrysler minivan, Prius, Enterprise Rent-A-Car, Tesla, and others.

There are several implications. Firms need:

  • To shift some investments from incremental innovaton to “big” innovations.
  • The ability to recognize what is a “must have” in the marketplace and what is not.
  • The will and capability to manage subcategories rather than brands, to make sure that their subcategory wins and that it evolves so it keeps winning.
  • To become the representative or exemplar of the new subcategory by being its innovation leaders and spokespeople.
  • To own the subcategory by creating barriers to competitors. One route is to brand the “must have” innovations. A branded technology, for example, like Uniqlo’s HeatTech fabric that retains heat, is hard to duplicate because Uniqlo owns the brand.

Second, there is a growing shift from communicating facts about the brand, offering, or firm to developing content that interests and involves customers and populating that content with stories in addition to facts. The digital world, where customers are increasingly gaining control of the communication vehicles, is one driver of that shift.

The tragic reality is that people are not interested in your brand, offering, or firm. They are just not. An alternative is to look to what they are interested in, what activities occupy them, what they talk about, what their passions are. I call it the customer “sweet spot.” Then, find or develop content or programs around that interest area with the brand as an involved partner.

Customers are not so interested in:

  • Diapers but they are in baby care and the Pamper’s LoveSleepPlay baby care site.
  • Cosmetic products but they are in beauty and Sephora’s BeautyTalk.
  • Farm equipment but they are in improving farming and the rural life style and in John Deere’s The Furrow magazine, now over 100 years old and read by over 2 million farmers around the world.
  • Hardware products but they are in building homes for the homeless and thus Home Depot’s link with Habitat for Humanity.

A sweet-spot-driven content or program can generate interest and energy, create or enhance perceptions, engender trust and authenticity, and stimulate a social network.

It also elevates the role of signature or strategic stories. The story about how a Nordstrom employee in Fairbanks, Alaska, only two weeks on the job, took back two worn snow tires even though Nordstrom never sold tires represents employee empowerment and customer concern at Nordstrom more effectively than just communicating policy standards. Research has shown that when facts are packaged into stories they are more attended to, remembered, and persuasive—by a huge margin. Brand building is increasingly about content and stories around customer sweet spots.

“The trend toward having and elevating a higher purpose should continue to grow.”

Third, the trend toward having and elevating a higher purpose should continue to grow. In addition to being the right thing to do and addressing real societal problems, a higher purpose can provide inspiration and meaning to employees. Being engaged in reducing global warming or enabling students to be more creative is more rewarding than just increasing sales and profits. A higher purpose can also promote cross-silo collaboration by providing a common goal that encourages people to perceive colleagues as teammates instead of being irrelevant or even competitors. It becomes more likely for the employee to assert “How can I make us succeed?” than “How can I get ahead?”

A higher purpose can also provide a route to customer relationships. Patagonia, the ultimate in having environmental considerations in their heritage, in their products, and in their programs, attracts customer loyalty among those who share their values. Crayola’s goal, to help parents and teachers raise inspired, creative children, bonds with moms. Starbucks’ quest to inspire and nurture the human spirit one person, one cup, and one neighborhood at a time provides a way to connect that means something to customers. Even if a modest percentage of the market is motivated to buy based on the respect and shared values of the higher purpose, the result can mean the difference between struggling in the marketplace and success.

A higher purpose can be and often is simply empty words. To impact internally and externally, it needs to be and feel genuine with substance behind it. Actually, substance is becoming more common as more and more firms are supporting a higher purpose with links to organizational culture and meaningful programs that draw upon the assets, skills, and strategies of the organization and are guided by tangible measurable objectives. However, for customer relationships, this substance has to be not only real but visible. Making a higher purpose known and meaningful to customers is for many a huge branding challenge going forward.

These three trends represent forces in the marketplace that are making a real difference, determining winners and losers. Every firm would do well to assess how these trends will affect strategies going forward.

Branding has a long history with a lot of dynamics. Through its lens we can see some fundamental shifts in how marketing, indeed business, has changed and is changing.

This article was based on a talk at the New York American Marketing Association’s Hall of Fame event in May 2015.

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